Foreign Currency Market Update – GBP / CAD Update
Over the past week, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has been trending within the range of 2.0012 to 2.0312.
Although several commodity-correlated economies have seen central banks consider easing monetary policy in the face of weakening prices, the Bank of Canada (BOC) avoided cutting the benchmark interest rate at its most recent policy meeting. Canadian Dollar gains following this news were short-lived, however, after the central bank released a report in which growth forecasts were cut in the face of resiliently low crude prices. According to the BOC, the Canadian economy will grow just 2% in 2016 and 2.5% in 2017, lower than the previous forecasts of 2.3% and 2.6% respectively.
Last week saw the Pound fluctuate versus its major peers after comparatively weak data results were combatted by positive economic news. During his economic state visit, Chinese President Xi Jinping toured many British facilities and announced China’s intention to invest in British infrastructure. China plans to invest in British nuclear power and also in a project designed to see the North of England become a world-beating manufacturing region again.
On Monday the Pound Sterling to Canadian Dollar (GBP/CAD) conversion rate was trending within a tight range after British data produced poor results and oil prices tumbled. British BBA Loans for House Purchase, CBI Trends Total Orders and CBI Business Optimism failed to meet with median market forecasts. With a complete absence of Canadian economic data to provoke volatility, the ‘Loonie’ (CAD) declined in response to bearish crude prices. The current crude supply glut has swelled storage and futures indicate ongoing weak demand.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending in the region of 2.0181 during Monday’s European session.
Looking ahead, the British asset is likely to see changes in response to domestic data, particularly Tuesday’s third-quarter Gross Domestic Product. With a relatively quiet domestic economic data docket this week, the Canadian Dollar is most likely to see movement in response to oil prices and any news linked to the Federal Open Market Committee (FOMC) outlook. Wednesday’s FOMC rate decision will be of significance for those invested in the Canadian Dollar. Should the Fed announce intentions to hike the cash rate in December, as many economists have predicted, the Canadian Dollar is likely to soften considerably. With the Bank of Canada flirting with the possibility of future rate cuts, widening divergence between the neighbouring central bank’s policy outlooks could hurt trade. US Dollar strength is also significantly damaging to Canada’s cross-border trade.
There is one particularly significant Canadian economic data publication this week, however. Friday’s Gross Domestic Product is predicted to see growth of 0.9% on the year in August.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0138 to 2.0191 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.