GBP/CAD Exchange Rate Remains Unappealing as Canadian Retail Sales Impress

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Fails to Recover despite Surprisingly Strong UK Retail Data

UPDATE: A much stronger than expected UK retail sales report from March was not enough to help the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate recover strongly today.

While demand for the Pound (GBP) did rebound slightly, the Canadian Dollar (CAD) also saw Thursday strength following the publication of some stronger than expected Canadian retail data.

Canadian retail sales were twice as good as expected in February, printing at 0.8% rather than 0.4%. The yearly figure jumped to a solid 1.8%.

This left GBP/CAD below the week’s opening levels at the time of writing, trading at around CA$1.7408, despite the weakness of risk-correlated currencies earlier in the week.

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Dampened by Brexit Uncertainties and Oil Prices

Despite a brief slump in risk-sentiment at the beginning of the week, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has slumped since yesterday as hopes for a Brexit breakthrough diminish and the Canadian Dollar (CAD) finds support in commodity news.

Due to mixed risk-sentiment, GBP/CAD saw broadly mixed movement last week but ultimately slipped slightly.

The GBP/CAD interbank rate briefly surged to CA$1.75 at the beginning of the week, but has since slumped again by over a cent. At the time of writing, GBP/CAD is trending closely to its worst levels in a week.

Demand for the Pound (GBP) was largely unchanged following this morning’s UK inflation report. Instead, the currency remained weighed down by concerns about how the Brexit process will proceed.

Pound (GBP) Exchange Rates Fail to Find Support in Inflation Stats

Since the long-term Brexit delay until the 31st of October was announced last week, the Pound (GBP) has seen a more mixed performance, fluctuating within a relatively tight region on the latest UK news.

The long delay meant that investors no longer expect major Brexit developments in the near future, and expectations for a longer period of uncertainty in Britain’s economic outlook have risen.

Those concerns briefly lightened at the beginning of the week, on speculation that Brexit negotiations between the government and opposition Labour Party were going well.

However, those hopes were short-lived as reports yesterday claimed that the government was not willing to compromise enough on certain aspects to meet a new deal with Labour.

While some officials have denied these reports, they continued to weigh on the Pound today. Sterling also failed to find any fresh support in Britain’s March inflation rate report, which fell short of expectations.

Canadian Dollar (CAD) Exchange Rates Benefit from Oil Boost despite Weaker Manufacturing

Demand for the Canadian Dollar has risen since yesterday, despite the latest Canadian data failing to impress investors.

Tuesday saw the publication of Canada’s February manufacturing sales results, which fell short of expectations and contracted at -0.2% rather than coming in with the forecast stagnant 0.0%.

On top of this, the previous figure was revised lower, from 1.0% to 0.8%.

However, prices of oil, Canada’s most lucrative commodity, rose throughout the session and offset concerns about the manufacturing data.

Analysts such as Eric Viloria from Credit Agricole noted that the Canadian Dollar’s potential for gains would likely be limited until Canadian data begins to show more signs of improvement:

‘What we have seen is that there is still some soft Canadian data … it would need to show some more meaningful improvement before the Canadian Dollar can break out of its recent range’

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Investors Await Key Canadian Data

While the Pound to Canadian Dollar (GBP/CAD) exchange rate is falling, the Canadian Dollar (CAD) could see stronger demand if salient data showed signs of improvement.

Key Canadian data due for publication in the coming sessions has the potential to bolster Bank of Canada (BoC) interest rate hike bets and the CAD outlook if they impress investors.

The February trade balance report and March inflation rate stats will be published this afternoon, followed by retail sales from February and ADP’s latest employment data tomorrow.

These figures combined will offer markets a more updated health-check on Canada’s economic activity, meaning CAD could see a notable shift in movement before the end of the week if they surprise.

Of course, any Brexit developments could cause some Pound (GBP) movement, but failing that the Pound to Canadian Dollar (GBP/CAD) exchange rate could also be influenced by tomorrow’s UK retail sales results if they defy expectations.

Josh Jeffery

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