Pound Canadian Dollar Falls as Canadian Inflation Data Buoys Nation’s Economic Mood
(Updated 16:20, 28/07/21) The Pound Canadian Dollar (GBP/CAD) exchange rate fell late this afternoon despite the announcement that double-jabbed US and EU travellers would be able to travel to the UK and avoid quarantine restrictions.
As a result, confidence in the UK economy and Downing Street’s apparent optimism about easing Covid-19 restrictions has provided some uplift for the Pound.
Nevertheless, Canada’s inflation figure, which slowed but remained above the Bank of Canada’s (BoC) target, has buoyed confidence in the nation’s economic outlook.
‘We continue to expect inflation to rebound back toward 4% soon’, said Stephen Brown, the senior economist at Capital Economics.
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GBP/CAD Exchange Rate Falls as Delta Covid-19 Variant Developments Remain in Focus
The Pound Canadian Dollar (GBP/CAD) exchange rate dipped this morning despite cautious risk appetite beginning to dampen demand for the risk-sensitive ‘Loonie’. Risk mood soured this week following a sell-off in China’s stock market and a record low for US bond yields. The pairing is currently fluctuating around CA$1.74.
Neil Dennis, an analyst at Capital, explains:
‘The major risks in the weeks to come are plentiful. The Federal Reserve is looking ever more likely to announce a plan to taper its asset purchases, thereby signalling a monetary tightening cycle that is likely to last for several years – supposing the economic recovery remains on track.
‘But this is a risk in itself. Signs that the recovery may be slowing into the second half cannot be ignored. Nor can growing tensions between China and the West – including recent actions by Beijing rein in the activities of many of its tech sector companies.’
As a result, demand for the risk-sensitive Canadian Dollar continues to be plagued by uncertain and cautious global market mood.
Coming up today, the latest Bank of Canada (BoC) inflation report for June will be in key focus fur CAD investors.
Any signs of an improving Canadian economic outlook would be CAD-positive.
In oil price news, WTI crude is currently hovering around $72.00 per barrel as traders monitor global Delta coronavirus variant developments ahead of today’s US FOMC meeting.
Could a dovish outlook from the US Federal Reserve later this afternoon further sour risk sentiment and weaken the Canadian Dollar to Pound exchange rate?
Pound (GBP) Exchange Rate Steady as UK House Prices Cool in July
The Pound (GBP) failed to rise against the ‘Loonie’ today following reports that UK house price figures had cooled in July, according to Nationwide building society.
Today also saw Prime Minister Boris Johnson warn that it is ‘far, far too early’ to say whether the coronavirus pandemic has passed in England, despite daily Covid-19 infection rates falling for their seventh day in a row.
Boris Johnson said:
‘We’ve seen some encouraging recent data. There’s no question about that. But it is far, far too early to make, to draw any general conclusions.
‘The most important thing is for people to recognise that the current situation still calls for a lot of caution and for people just to remember that the virus is still out there, that a lot of people have got it.’
As a result, Pound investors have become cautious about the outlook for the British economy, with concerns that cases could rise once data following the lifting of lockdown measures – on July 19 – are fed into upcoming data.
GBP/CAD Exchange Rate Outlook: Canadian GDP and Oil Prices in Focus
Canadian Dollar (CAD) investors will be awaiting Friday’s release of the Canadian gross domestic product data for May.
Any improvement in Canadian economic growth would see the Canadian Dollar Pound exchange rate begin to claw back some of its losses.
However, falling oil prices could drag down demand for the commodity-linked Canadian Dollar this week. Added to this, souring risk sentiment would also be CAD-negative.
Pound (GBP) traders will continue to monitor the UK’s Covid-19 developments this week. Any signs that daily infection rates are continuing to fall would see confidence in the UK economy buoy-up the GBP/CAD exchange rate.