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 2.0363 to 2.0718.
2015 was not a good year for the Canadian Dollar. Crude oil prices dropped to as low as $36.50 a barrel as global production caused the supply glut to swell, whilst reduced demand from the world’s second-largest economy also weighed on prices. The Organization of the Petroleum Exporting Countries (OPEC) refused to curtail production amid fears that it would lose market dominance. Now that Saudi Arabia has been allowed to recommence oil production, thanks to a deal which saw the Saudi’s scrap a nuclear programme, crude futures remain bleak. What’s more, improving technology and environmental concerns should see increased demand for renewable energy sources.
In addition to low crude prices weighing on demand for the ‘Loonie’ (CAD) in 2015, the first Federal Reserve benchmark interest rate hike in nearly a decade provoked Canadian Dollar weakness. The Bank of Canada’s (BOC) policy outlook is very different to that of the Fed and the relative bullishness of the US Dollar has had a detrimental impact on the profitability of cross-border trade. Should the BOC opt to ease policy further, with oil prices showing no sign of a speedy recovery, the Canadian Dollar will likely extend losses throughout 2016.
On Monday the Pound Sterling to Canadian Dollar exchange rate advanced by around 0.3% after Canadian economic data failed to impress. December’s Canadian Manufacturing PMI saw the extent of contraction deepen from 48.6 to 47.5, taking the gauge well below the 50 mark which separates growth from contraction. Although British Manufacturing PMI also failed to meet with expectations, manufacturing output remained in growth territory. The British asset also saw heightened demand in response to positive results from November’s UK Mortgage Approvals, Net Consumer Credit and Net Lending Securities on Dwellings data.
Over the coming week there will be a number of Canadian publications with the potential to provoke ‘Loonie’ volatility. The most significant of which will be Friday’s labour market data. December’s Net Change in Employment is forecast to see 10,000 newly employed. December’s Unemployment Rate is forecast to hold at 7.1%. However, domestic data is unlikely to have a huge impact on demand for the Canadian Dollar as trader focus continues to be dominated by crude oil prices.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0401 to 2.0593 during Monday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.