The Pound to Canadian Dollar exchange rate gave up its Monday gains and plunged to a new weekly low on Tuesday as Britain’s latest Consumer Price Index (CPI) report disappointed Sterling traders. The interbank GBP/CAD exchange rate had trended at around 1.63 since the weekend but fell to 1.62 on Tuesday.
Pound (GBP) Undermined as UK Inflation Causes Drop in BoE Bets
The Pound performed strongly at the start of the week as investors remained hopeful that recent strong UK trade and private sector data would help pressure the Bank of England (BoE) into tightening UK monetary policy despite Brexit concerns.
However, when Britain’s January Consumer Price Index (CPI) results came in on Tuesday morning, the result was worse than investors were hoping for, with the result that the Pound was weakened considerably.
Traders had expected UK inflation to climb from 1.6% to 1.9% year-on-year, but it instead only rose to 1.8%. Month-on-month inflation fell from 0.5% to -0.5% in January as expected.
Canadian Dollar (CAD) Bolstered by Canadian Trade Hopes
The Canadian Dollar has had a volatile few weeks as investors question the likelihood of a prolonged recovery in oil prices.
As oil is Canada’s most lucrative commodity, the Canadian Dollar is often influenced by shifts in the oil market.
On Monday, OPEC published its monthly oil report. The document stated that it expects demand for the liquid commodity to remain solid throughout the year despite concerns that the oil supply glut is persisting. As a result, CAD demand improved during Monday’s American session.
The ‘Loonie’ also benefitted from Monday’s meeting between US President Donald Trump and Canadian President Justin Trudeau. As the meeting appeared to go smoothly and without conflict, fears that US-Canada trade is at risk faded.
GBP/CAD Forecast: UK Employment Results Ahead
The rest of the week will be quiet for Canadian data, meaning the Pound to Canadian Dollar exchange rate is more likely to be influenced by UK data and general risk-sentiment in the foreign exchange market.
Perhaps most vitally, Wednesday’s session will see the publication of Britain’s jobless claims results from January and employment figures from the three months through December.
Jobless claims are expected to worsen just slightly in January, and Britain is expected to have added 22k new jobs from October to December 2016. If these results disappoint expectations, the Pound selloff could continue on Wednesday.
Canada’s January existing home sales results will also be published on Wednesday, but the stat is not likely to have too much impact on exchange rate movement.