Foreign Currency Market Update – GBP / CAD Update
The past week saw the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate climb sporadically from a starting rate of 2.0436 to an eventual high of 2.0574, although the week was fraught with major dives in performance for Sterling.
The first of two major declines in the exchange rate came on Tuesday with the release of the UK Consumer Price Indices (CPI) for August – although the monthly inflation rate saw a 0.2% increase, the non-core and core annual figures both posted lessening figures. This was most apparent on the base annual CPI, which printed at 0%. Although there was initially no cause for alarm owing to the Bank of England (BoE) earlier predicting that UK inflation would remain at or close to 0% until the end of the year, opinions progressively darkened over the course of the day, seeing Sterling’s performance deteriorate, with a weekly low of 2.0269 being recorded on Wednesday morning. The issue was compounded by the Canadian Existing Homes Sales for August increasing by 0.3%.
The second shock of the week in the pairing came on Thursday when the UK Retail Sales figures for August highlighted a slowdown in sales in three out of four fields. Only the monthly Retails Sales Including Auto Fuel improved on the previous result, showing a 0.2% rise from 0%. Once again, Sterling took a hit, although the damage was lesser, with the pairing coming in at a 2.0351 low. Despite the Federal Open Market Committee (FOMC) leaving US interest rates at 0.25% on Thursday evening, the Pound was still able to gain on the ‘Loonie’ before the weekend, thanks to the Canadian CPIs for August providing a mixed picture on the country’s economic future.
This week, Sterling has declined steadily against the Canadian Dollar, in spite of the price of gold and crude oil both diminishing since the weekend. One of the biggest reasons for this has been a speech by Bank of Canada (BOC) Governor Stephen Poloz given last night. Poloz stated that despite the current problems faced by the Canadian economy owing to commodity prices, the abundance of natural resources in the country is something to hold onto even in a time of historically low crude oil and gold values.
Poloz reassured investors significantly by saying: ‘Even when prices are falling, as they have been recently, our endowment represents a store of value and a source of future riches. We’ve adjusted to rising prices; we can adjust to falling ones. Over the years, Canadians have used our endowment to build a prosperous economy. We will continue to do so.’
For the rest of the week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of the Canadian Retail Sales for July (out tomorrow), the UK BBA Loans for House Purchases (out Thursday) and the US Durable Goods Orders figure for August, out on the same day.
An increase from 0.6% to 0.8% is predicted for the Canadian Retail result, a rise of 47000 has been forecast for the UK figures and a -2.3% drop is expected for the US Orders outcome.
Heads Up
Summary of major upcoming data releases that we think may move the market.