Foreign Currency Market Update – GBP / CAD Update
Over the past seven days the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0025 to 2.0336.
With a number of economic factors weighing on sentiment for the Canadian Dollar, the ‘Loonie’ (CAD) has held a weak position versus its peers. Against the backdrop of rising global stockpiles swelling an expansive glut, crude oil prices have held below $50 a barrel for a considerable period, with black-gold now trading in the region of $45 per barrel following recent US stockpiles data. Even massive tensions in Middle Eastern oil producing regions has not been enough to offset crude losses. This has had a massively detrimental impact on the Canadian Dollar, with increased speculation that the dent in trade as a result of low oil prices will provoke the Bank of Canada (BOC) into stimulating policy further. However, given that oil prices have remained weak for a considerable period it can be argued that the loss of trade has been well and truly priced-in at this point.
In general the British asset cooled versus its peers last week in response to mixed economic data results and weakness from the Eurozone. Last Friday’s third-quarter British growth data highlighted a slowdown as a result of weak manufacturing and construction output and the loss of trade resulting from troubles in the Eurozone. Rising British house prices are also presenting concerns for Sterling watchers as a bubble could provide a real drag on economic growth. However, higher house prices may persuade the Bank of England (BoE) to hike rates ahead of expectations despite the apparent absence of inflationary pressure.
The British asset edged lower versus many of its currency rivals on Monday after domestic data produced mixed results. October’s Net Consumer Credit was predicted to hold at 1.3 billion Pounds, but the actual result dropped to 1.2 billion. Also, October’s Mortgage Approvals failed to rise in line with the median market forecast 69,000 to 69,900, with the actual result only reaching 69,600. However, Net Lending Securities on Dwellings bettered the market consensus of a drop from 3.6 billion to 3.4 billion, with the actual result holding at 3.6 billion in October.
Looking ahead, there will be a number of influential ecostats from Canada with the potential to provoke significant market movement. Dominating trader focus this week will be Wednesday’s Bank of Canada (BOC) interest rate decision. Whilst a number of analysts remain convinced that the BOC will ease policy thanks to weak crude prices, the majority of experts forecast that the central bank will hold rates. Analysts at Barclays, for example, predict that the impact from low crude prices has been somewhat countered by activity in the non-resource sector. Tuesday’s Canadian GDP for September will also be hugely influential, given that it will likely inform policymaker decisions the following day.
With fewer influential UK ecostats over the coming week the Pound may see comparatively subdued trade. However, Sterling movement could occur in response to a number of purchasing managers indexes. Of particular significance will be November’s Services PMI, due for publication on Thursday. This is particularly significant because the services sector accounts for the largest proportion of UK GDP. Pound pundits will also be keeping a close eye on results from Manufacturing and Construction PMIs because recent weakness in both sectors has dragged on growth prospects.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0071 to 2.0136 during Monday’s European session.
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