The current week has seen the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate slide by a small amount, although the UK currency has posted greater gains elsewhere amid optimism over the UK referendum, which may be taking place as early as June this year.
The referendum remains a hot topic among investors, with the most recent development seeing PM David Cameron express hope that the terms can be agreed by February. This is considered to be an over-ambitious deadline by some, however, given that the backing of EU leaders is needed for a deal to be made. Most notably, the PM has refused to budge his plan to have the benefits of migrants to the UK frozen for four years from their arrival time in an effort to crack down on ‘benefits tourism’. This has proved a highly controversial notion and one that many EU leaders are strongly opposed to.
After struggling in recent weeks in the face of 11-year low oil prices, the ‘Loonie’ has enjoyed a strong start to the week thanks to negative results being balanced by positive forecasts.
While the price of crude oil per barrel has continued its downwards path today by printing at $32.75, the price of gold per 100 ounces has conversely been supportive and risen to $1104.2.
Although some economists have predicted that the bullish US Dollar could push the Canadian Dollar out of the running for good in 2016, others have been far more optimistic about the long-term future for the Canadian currency. Director of the Canada Institute Laura Dawson has hypothesised that were Canada and China to secure a free-trade agreement, the Canadian economy would benefit to the tune of ‘Billions and billions of dollars every year’.
This week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of Thursday’s November monthly and yearly New Housing Price Indexes and Friday’s Existing Homes Sales covering December. At the time of writing, expectations were for a small decline in the monthly index.
From the UK, tomorrow’s December BRC Like-for-Like Sales and Industrial and Manufacturing Production results are likely to have an impact on GBP/CAD movement, as well as from a speech due to be delivered by Bank of England (BoE) Governor Mark Carney. The most impactful UK release, however, is expected to be Thursday’s BoE Interest Rate Decision.
Tomorrow’s forecasts are for an improvement in the UK sales result from -0.4% to 0.5%, along with a repeat print of 1.7% for the Industrial Production field and a worsening from -0.1% to -0.8% for the manufacturing variant.
Carney’s speech tomorrow is expected to be a ‘high impact’ one, but given that the context is a farewell symposium for Banque de France Governor Christian Noyer, it remains to be seen how much UK economy policy Carney can inject into the proceedings.
On Thursday, the first UK interest rate decision of 2016 will be made, although nobody is expecting a hike to take place for at least the first few months of the year. However, if policymakers display an especially hawkish tone, the Pound could be strengthened enormously with regard to expectations of a UK interest rate increase taking place sooner rather than later.
Heads Up
Summary of major upcoming data releases that we think may move the market.