The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has traded between 2.0142 and 2.0785 over the past seven days of trading.
Positive UK Consumer Price figures gave Pound Sterling a momentary lift on Tuesday, although the underlying data suggested the better-than-expected performance was not as rosy as it first appeared. Airfares and other transportation costs saw a huge rise in prices, while almost all the other categories that make up inflation data experienced a decline.
In the first of many oil-related panics during the past seven days, the Canadian Dollar was pushed down by another tumble in prices. Both Brent and WTI crude dropped below US$29 per barrel, with Brent sliding to a twelve-year low of US$27.88 overnight on the 19th. Oil oversupply concerns were exacerbated as Iran returned to the export market, with the United Nations lifting sanctions that paved the way for the Gulf country to increase oil production by 500,000 barrels per day (bpd). The ‘Loonie’ was also harmed by news that the International Monetary Fund (IMF) downgraded its 2017 forecast for Canadian economic growth from 2.4% to 2.1%.
Pound Sterling was able to appreciate on the 20th thanks to better-than-expected labour market data, which showed that the number of Jobless Claims fell -4.3k compared to the 2.8k rise forecast, while the ILO Unemployment Rate unexpectedly dropped from 5.2% to 5.1%. Average Weekly Earnings growth was sluggish, however, slightly undercutting the 2.1% rate forecast.
The GBP/CAD exchange rate advance was later halted as the Bank of Canada (BOC) held interest rates level at 0.50%. Many economists had believed that cutting rates again in the face of worsening global conditions would only undermine the Canadian Dollar and economy.
Oil broke above the US$30 per barrel mark on the 21st, causing a widespread jump in Asian stocks, led by the Japanese Nikkei 225 index, which closed up 6%. The Canadian Dollar gained 90 pips during the London session, following one of the strongest resurgences in oil prices ever seen, despite head of BP Bob Dudley agreeing with a forecast from Standard Chartered that oil might drop as far as US$10 per barrel.
Further strength for the ‘Loonie’ came from Canadian Prime Minister Justin Trudeau, who addressed delegates at the World Economic Forum in an attempt to convince investors that Canada has far more to offer than just natural resources.
The Canadian Dollar is currently bullish thanks to tentative signs from OPEC that they may be ready to cooperate with global oil producers and cut production to stem the current oil flood. While the chances of an alliance between the world’s oil producers seems unlikely, the fact that OPEC are responding to the market crisis suggests an acknowledgement that the current situation of over-pumping has gone too far.
Property prices and mortgage data for the UK is due out tomorrow, which could fuel volatility in the GBP/CAD exchange rate if the data increases fears of a UK property bubble. Canadian budget balance figures are expected to be released during the North American session, forecast to show a surplus of C$514.3 million following a slight deficit of C$-0.94.
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Summary of major upcoming data releases that we think may move the market.