In spite of last week’s final UK reports adding to concerns surrounding the UK’s economic outlook, the Pound had a strong start to the week and registered an impressive gain against the ‘Loonie’.
The Canadian Dollar, meanwhile, started off the week on a low note as a result of falling commodity prices.
Over the previous week, the Pound hit both its high and low points on Friday, hitting a peak of 1.7423 before diving to 1.7123 following the publication of the UK’s PMI reports.
Pound Rocked by Fluctuating Confidence Last Week, Latest CBI Printings Poor
Last week was a fairly dramatic one in terms of movement for the Pound, which opened on a strong showing when Bank of England (BoE) official Martin Weale stated that an interest rate cut in August was not guaranteed.
Tuesday saw inflation rise from 0.3% to 0.5% on the year in June, while the Pound was given another boost on Wednesday when the unemployment rate for May fell from 5% to 4.9%.
Thursday was a lot less positive, as retail sales (both base and non-fuel) fell on the month and the year in June, while Friday saw a shattering of any remaining confidence when the PMI reports for July all fell below the 50 mark separating growth from contraction.
Although Monday’s Confederation of British Industry (CBI) trends for total orders and business optimism reports showed a considerable decline in July, the Pound has nonetheless held its ground against rivals. GBP was bolstered by the fact the a new trade deal with China is apparently in the works, according to Chancellor Phillip Hammond.
Canadian Dollar Slumps as Commodity Prices Struggle
Domestic data out of Canada has been lacking in recent days, with the last notable news being that retail sales fell on the year in May while inflation remained at 1.5% on the year in June but dipped from 0.4% to 0.2% on the month.
Demand for the ‘Loonie’ has also been limited due to falling commodity prices, with the cost of gold per 100 ounces and the price of crude oil on the WTI index both declining.
In a lighter development, Canada’s Finance Minister Bill Morneau has indicated that he is open to trade talks with the UK in the wake of the Referendum, stating:
‘We’re waiting and ready to have those discussions, recognising we may not be very first on the list of issues. From our standpoint, Britain is a very important trading partner and will continue to be so’.
GBP/CAD Exchange Rate Forecast
For the current week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of Wednesday’s UK GDP growth rate figures, Thursday’s UK Nationwide housing prices and Friday’s Gfk consumer confidence printing for July.
From Canada, the last day of the week will bring the announcement of the May GDP outcome.
In summary, UK GDP is expected to dip on the year for the second quarter, while a similar decline is on the cards for the July housing prices. For the Gfk consumer confidence printing, a drop from -1 to -5 is forecast. Any reports which support the theory that the UK economy has been damaged significantly by the nation’s decision to Brexit from the European Union could weigh on the Pound.