Canadian Dollar (CAD) Unable to Capitalise on Business Confidence Rebound
UPDATE: An unexpectedly sharp rebound in the Ivey PMI was not enough to shore up the Canadian Dollar (CAD) this afternoon.
Although business confidence strengthened from 50.4 to 61.8 in October, almost entirely reversing the previous month’s slump, worries remain over the underlying health of the Canadian economy.
As a result, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate remained on a stronger footing, in spite of the disappointing nature of the latest UK housing data.
Mixed Canadian Building Data Encourages GBP/CAD Exchange Rate Uptrend
UPDATE: A better-than-expected Canadian building permits figure failed to prevent the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate from pushing higher this afternoon.
Although the number of building permits rebounded in September the August figure was revised lower to show a sharp contraction of -1.1%.
This limited confidence in the outlook of the wider economy, keeping the Canadian Dollar on the back foot.
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Holds Steady in Spite of Modest Retail Sales
A modest rebound in October’s British Retail Consortium (BRC) like-for-like sales failed to give Pound Sterling (GBP) any particular boost this morning.
As sales only edged up 0.1% on the year this highlighted the persistent weakness of the economic outlook, with the sales boost from the summer heatwave long-since gone.
Worries over Brexit continue to hang over the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate, meanwhile, as investors continue to look for solid signs of progress towards an agreement.
Until the Irish border issue is settled the chances of an imminent deal remain slim at best, limiting the appeal of the Pound as markets brace for the risk of a no-deal Brexit.
Even so, the GBP/CAD exchange rate has still been able to stave off any major losses for the time being.
BoC Optimism Fails to Outweigh Bearish Oil Market as Canadian Dollar (CAD) Falters
Optimistic comments from Bank of Canada (BoC) Governor Stephen Poloz failed to hold the Canadian Dollar (CAD) up for long.
Although Poloz defended the BoC’s forecasts this was not enough to convince markets, especially in the face of persistent risk aversion.
Weakening oil prices added to the bearish mood of CAD exchange rates as the US granted a number of exceptions to its sanctions on Iranian oil exports.
With the global oil supply looking set to build further in the weeks ahead this left crude prices on the back foot, dragging the commodity-correlated Canadian Dollar down too.
Mounting jitters over the outcome of the US midterm elections have also put a dampener on CAD exchange rates today.
Third Quarter UK GDP Acceleration to Boost Pound Sterling (GBP) Exchange Rates
The GBP/CAD exchange rate could extend its bullish run further on Friday if the third quarter UK gross domestic product data proves positive.
Forecasts point towards growth accelerating from 0.4% to 0.6% on the quarter, suggesting that the economy is recovering some of its lost momentum.
As long as the UK economy shows signs of shaking off the lingering sense of Brexit-based uncertainty the mood towards the Pound is likely to improve further.
If the GDP data falls short of forecasts this could add to fears that the economy could see a further slowdown in the fourth quarter, leaving the GBP/CAD exchange rate biased to the downside.
September’s UK trade and production figures may also provoke volatility for the Pound, with a widening of the trade deficit likely to dent market confidence.
Weak Housing Data may Keep Canadian Dollar (CAD) Under Pressure
Canadian housing data may offer the GBP/CAD exchange rate additional support over the course of the week if the latest figures fail to show sufficient improvement.
Fresh evidence of a weakening construction sector and falling house prices would further undermine confidence in the outlook of the Canadian economy, leaving the Canadian Dollar exposed.
A weaker housing sector does not bode well for the health of the wider economy, giving the BOC less reason to consider raising interest rates further.
However, if October’s Ivey PMI shows an improvement on the month this could help the Canadian Dollar to recover some of its lost ground.
Provided the PMI climbs further away from the neutral baseline of 50 CAD exchange rates could return to a stronger footing on Wednesday.