The Pound to Canadian Dollar exchange rate dropped by almost 5 cents over the course of last week as the Bank of England’s (BoE) aggressive stimulus package began to take affect and a surprising rally in oil prices boosted the oil-correlated ‘Loonie’ Dollar. Last week’s GBP/CAD high was 1.7252, but the pair currently trends near lows of 1.6696.
Sterling (GBP) Sentiment Low Ahead of this Week’s Data
Last week saw the Pound tumble across the board, as markets continued reeling from the Bank of England’s (BoE) surprising easing measures announced at the beginning of the month.
The BoE package included four major points; an interest rate cut to 0.25%, an expansion to quantitative easing, £10bn of corporate bond purchases and a term funding scheme to assist high street banks with the new measures.
With the bank’s new QE experiencing a less-than-smooth start last week, analysts became increasingly anxious about the package’s effectiveness and fixated on the prospect of further easing in coming months.
As the new week began, Sterling advanced with little in the way of upward inspiration. The undervalued British currency is becoming increasingly low-yield and has regained the crown of 2016’s worst-performing currency, making it extremely unappealing and weighing on recovery attempts.
A house price report from Rightmove did little to change things as it reported that property values fell -1.2% in August.
Canadian Dollar (CAD) Boosted as Market Oil Hopes Rise
The Canadian Dollar experienced one of its first solid rallies in a while last week despite underwhelming Canadian data as things were looking up for the nation’s most lucrative export.
Prices of oil were bolstered last week, as a statement from Saudi Arabia’s oil minister indicated that the nation was considering agreeing to an oil output freeze in order to help a potential recovery in the commodity’s low prices.
There have been mutterings over the last week of an informal meeting between OPEC members and non-members taking place in September in an attempt to reach some kind of oil output cap agreement.
This news caused demand for oil to surge, with investors hoping that the commodity’s price could finally recover if an agreement is met. The oil-correlated Canadian Dollar subsequently firmed, with the currency capitalising on a weak Pound.
GBP/CAD Forecast: Inflation Figures Ahead
The week’s main GBP mover is likely to be Tuesday’s UK Consumer Price Index (CPI) report for July.
The print will be the first solid indication of how UK inflation has responded to the nation’s vote to Leave the European Union. Investors currently expect consumer prices to have contracted -0.1%. However, a rise in prices due to a weak Pound is also possible.
Canada’s biggest report this week (also being July inflation figures) will not be published until Friday. This will leave the Canadian Dollar to be influenced by fluctuations in oil prices for much of the week.
Any confirmation that oil-producing nations will meet in September for production freeze discussions could cause oil prices (and the ‘Loonie’) to rise in value.