At a time when commodity prices are in crisis, the cost of gold and crude oil have actually come out supportively for the Canadian Dollar today. The past week has seen the Pound Sterling to Canadian Dollar exchange rate progressively deteriorate from a high of 1.9636 to a low of 1.8738 by the end of the week.
Sterling Damaged by Boris’ ‘Brexit’ Announcement Last Week
In a week filled with damaging UK Referendum announcements and developments, the greatest blow came on Monday, when Mayor of London Boris Johnson revealed that he would be supporting the campaign to separate the UK and the EU. Investors balked at the news, given the assumptions that Johnson’s influence would be capable of winning over a significant number of voters to the ‘Out’ campaign’s ranks.
The declaration was met with immediate criticism by the PM, who implied that Johnson was seeking personal advancement within the Conservative party, rather than sincerely towing the ‘Leave’ line. Criticism was also directed at Johnson’s apparent plan to vote ‘Out’ in order to secure better terms within the EU, despite the fact that a ‘Leave’ decision would be precisely that.
Regardless of all the furore that Johnson caused, the Pound failed to recover in value across the week.
Sterling Climbs Today in UK Referendum News Absence
While the morning’s domestic data was unsupportive for the Pound (manufacturing in February fell to an almost 3-year low), the UK currency has nonetheless managed to post steady gains against most of its usual peers.
This is potentially because of an absence of headline-grabbing ‘Brexit’ stories, a situation which comes as a welcome change to investors in Sterling.
Canadian Dollar Turns Bullish After GDP Printing
Last week was incredibly quiet for the Canadian Dollar, which had very few domestic data releases to generate movement, whether it was positive or negative.
This week, however, the ‘Loonie’ has shot up against the competition due to the rising price of crude oil and gold, in addition to this afternoon’s December GDP and February manufacturing PMI stats.
In the former case, against forecasts of reductions to 0-0.1% the GDP printings have instead come in far higher than expected, while in the latter, manufacturing has risen from 49.3 to 49.4, though it is worth noting that this is still a figure in the contraction range.
This Week’s GBP/CAD Exchange Rate Forecast
For the present week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of tomorrow’s UK construction PMI for February, Thursday’s UK Nationwide house prices and composite and services PMIs for the same month and Friday’s Canadian Ivey purchasing managers index, which has been seasonally adjusted for February.
While today’s manufacturing PMI fell disappointingly close to the contraction range, current expectations are that tomorrow’s construction printing will rise from 55 points to 55.5.
Unfortunately, this sentiment has not been echoed for Thursday’s UK PMI contributions, which are expected to decline in both categories while remaining in ‘growth’ ranges. Also on Thursday, the annual UK Nationwide house prices have been forecast to increase from 4.4% to 4.9%.
Closing the week for the GBP/CAD pairing, Friday’s Ivey PMI figure has the potential to lower the appeal of the Canadian Dollar, given that it is expected to slide from 66 points to 58.
Heads Up
Summary of major upcoming data releases that we think may move the market.