It’s been a rocky week of trading for the Pound Sterling to Canadian Dollar exchange rate, with the GBP/CAD pairing having traded between 1.9827 and 2.0286 over the past seven days.
The UK seems to have started a trend for releasing data that appears positive on the surface but hides more unfavourable conclusions. While the UK’s trade balance figures for December, released on Tuesday, showed a better-than-expected drop in the trade deficit, they completed the overall picture of trade in 2015 and showed a record-high deficit for the year. The next day was equally bad for the Pound, with industrial production and manufacturing production falling further-than-expected and a prediction of UK growth from the National Institute for Economic and Social Research (NIESR) of just 0.4%.
Canadian Dollar movement has once again been driven over the past few days by oil movements, with very little domestic news or data to alter its course.
UK CPI Figures Continue UK Run of Data Disappointments
While UK consumer prices rose at their fastest rate for a year, creeping up to 0.3% growth, the latest round of data marks two years of below-target inflation. With the Bank of England’s (BoE) goal of 2% inflation still a long way off, investors were in no mood to celebrate the small success of January’s figures. Sterling appetite was also cooled due to that fact that the core CPI measure slipped further-than-forecast, while on a monthly basis prices dropped -0.8%.
UK unemployment figures have given the Pound a much-needed boost today, printing well above expectations, although the overall employment rate has remained at 5.1% rather than dipping to 5%. The number of people claiming unemployment benefits fell much-more-than-expected, however, dropping -14.8k rather than the -2.5k result predicted.
Hypothetical Oil Production Cut Taunts Canadian Dollar
The Canadian Dollar followed the price of oil on an uptrend on Monday thanks to news that Russian and Saudi Arabian fuel ministers would meet to discuss measures to raise oil prices. Speculation was rife throughout the market and drove ‘black gold’ futures higher, with Brent crude breaking above the seemingly insurmountable US$35 per barrel mark and WTI edging over US$30 per barrel.
However, fortunes were soon reversed on Tuesday after it was revealed that the sum of the meeting was an agreement between the two countries to freeze oil output at the levels seen in January, rather than committing to cutting output. Venezuela will also freeze production. The news disappointed investors, who were hoping to finally see some relief from the downward pressure on oil prices.
As a result of the OPEC disappointment the Canadian Dollar has softened, although the weakness caused to Pound Sterling because of the UK CPI figures has allowed the ‘Loonie’ to remain comparatively strong.
UK Public Borrowing and Canadian GDP in Focus
UK Retail Sales and Public Sector Borrowing figures are due out on Friday. Investors will be particularly keen to see the extent of the UK deficit as January is a key month, during which self-assessment taxes are paid, so a strong tax revenue will help George Osborne balance the books. Canadian Consumer Price Index figures are due out on Friday and are expected to show a mild uptick.
Heads Up
Summary of major upcoming data releases that we think may move the market.