While it held its ground when markets opened on Monday, last week saw the Pound to Canadian Dollar exchange rate plummet as investors began to buy risk-correlated currencies again.
GBP/CAD has tumbled from 1.64 to 1.61 over the last seven days. On Friday, the pair briefly hit a low of 1.6151, its worst level since January.
Pound (GBP) Lacks Drive to Recover
Despite a strong UK labour market report last week, other recent UK data has failed to impress and continues to indicate that Britain’s long-term outlook is full of uncertainty.
Many analysts remain concerned that British growth will slow if the pay squeeze continues and wears down the current resilience of UK consumers.
Inflation has also been slower than expected in recent months, giving the Bank of England (BoE) more breathing room to keep monetary policy at its loosest levels on record.
Overall, with UK inflation slacking and retail sales showing signs of weakness, investors simply don’t have much reason to buy the Pound at the moment.
Canadian Dollar (CAD) Stronger as Risk-Sentiment Rises
Risk-correlated currencies like the Canadian Dollar were popular last week as US political concerns spiked again and Federal Reserve interest rate hike bets remained weak.
Investors aren’t expecting the US Trump administration to succeed in tax reform or infrastructure legislation any time soon and the Fed has taken a cautious tone on monetary policy due to weaker US inflation.
As a result, investors looking for stronger yields bought up risk-correlated currencies like the ‘Loonie’.
The Canadian Dollar has been even more appealing due to domestic data as well as recent oil price news. As oil is Canada’s most lucrative commodity, a recent oil rally has supported ‘Loonie’ strength.
July’s Canadian Consumer Price Index (CPI) results were generally optimistic. While the monthly inflation rate fell short of expectations at 0%, the yearly inflation rate met expectations of 1.2%.
The report indicated that Canadian inflation was likely to have already bottomed out and would rise over the coming months as the Bank of Canada (BOC) expected.
GBP/CAD Forecast: Canadian Retail Sales Ahead
The Pound to Canadian Dollar exchange rate could see a shift in direction on Tuesday, depending on the results of the day’s Canadian data.
While Britain’s public sector borrowing and CBI industrial trends report could inspire Pound movement earlier in the day, the main focus will be on Canada’s June retail sales report.
Monthly retail sales are forecast to have slowed from 0.6% to 0.3% and the previous yearly figure came in at 7.3%.
If Canada’s retail sales report beats expectations, the Pound to Canadian Dollar exchange rate could remain near its multi-month-lows.
However, poor Canadian retail data could help GBP/CAD recover.
Pound traders will also be waiting for Thursday’s key UK Gross Domestic Product (GDP) projections, due Thursday.
UK growth is currently projected to have slowed from 2% to 1.7% year-on-year in Q2 but risen from 0.2% to 0.3% quarter-on-quarter.