Foreign Currency Market Update – GBP / CAD Update
Last week the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 1.9952 to 2.0297.
Last week saw the Canadian Dollar depreciate versus many of its currency rivals with crude oil prices remaining historically low. With US stockpiles showing little sign of a dramatic reduction and with Iran re-entering markets, oil futures remain significantly down. As one of the world’s foremost oil exporters, the long period of low black-gold prices has had seriously detrimental ramifications for the Canadian economy. Many now predict that the Bank of Canada (BOC) will be forced to intervene in order to avoid a sharper economic slowdown.
In terms of the GBP/CAD exchange rate last week, however, there was a significant downtrend following the dovish Bank of England (BoE) ‘Super Thursday’. After the British central bank cut growth and inflation forecasts many traders were forced to delay bets for a cash rate increase into 2017. This saw the GBP/CAD exchange rate dive. However, on Friday the GBP/CAD pairing recovered some of its losses following a particularly strong US Non-Farm Payrolls result. This provoked fears of widening policy divergence between the Fed and the BOC, and USD overvaluation will make cross-border trade much less lucrative. However, GBP/CAD gains were minimal after Canadian labour market data bettered estimates with a surprise uptick in Net Change in Employment and surprise reduction in Unemployment. Meanwhile, the hawkish Fed outlook has aided hopes that the BoE will look to lift rates ahead of the current predictions of late 2016/early 2017.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending in the region of 2.0027 during Monday’s European session.
On Monday the GBP/CAD exchange rate was trending within a limited range ahead of Canadian Housing Starts data. Although the US Dollar has cooled somewhat amid overvaluation concerns, the Canadian Dollar is holding a comparatively weak position versus its peers with crude oil prices remaining low. A complete absence of British economic data today has seen relatively subdued Sterling trade, but a slight lean towards appreciation can be linked to hopes that improved Fed bets will result in an improved BoE policy outlook.
Looking ahead, the coming week’s economic docket is sparse of influential data pertaining to both the UK and Canada. Wednesday will be the only day this week that will see significant UK data with the Pound likely to see volatility in response to labour market and wages ecostats. In terms of Canadian data, Thursday’s New Housing Price Index may provoke changes. However, crude prices and US Dollar positioning may have more impact on ‘Loonie’ movement over the coming week.
The Pound Sterling to Canadian Dollar exchange rate was trending within the range of 1.9993 to 2.0042 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.