Pound Canadian Dollar (GBP/CAD) Exchange Rate Volatile amid New Market Turmoil
(Updated 16:30, 24/3/23) The Pound Canadian Dollar (GBP/CAD) exchange rate experienced some turbulence today, with the currency pairing witnessing some erratic movements just below a one-year high.
The volatility came amid fresh fears about the banking sector. Just as markets started to grow calm after the collapse of three US banks and the rescue of Credit Suisse, a new selloff started. Germany’s Deutsche Bank – the country’s largest lender – was hardest hit, leading some to question whether it is the next ‘sick bank’ of Europe.
Deutsche Bank shares slump 15% in resurgence of European bank worries. Latest bout of stress comes days after Credit Suisse rescue. pic.twitter.com/fIxalQzE7H
— Holger Zschaepitz (@Schuldensuehner) March 24, 2023
These renewed banking sector jitters are creating some turbulence in markets.
Meanwhile, mixed UK data has impacted the Pound (GBP). UK retail sales exceeded forecasts but the latest PMI surveys came in below expectations.
As for the Canadian Dollar (USD), it has been pulled in two different directions: downwards by falling oil prices, as CAD is tied to crude, and upwards thanks to CAD’s positive correlation with a strengthening US Dollar (USD).
At the time of writing, GBP/CAD is trading at CA$1.6811. This is down around 0.2% on the day, with the pairing having see-sawed between lows of CA$1.6793 and highs of CA$1.6861.
Original article continues below:
Pound Canadian Dollar (GBP/CAD) Exchange Rate Stumbles as Markets Digest UK Data
The Pound Canadian Dollar (GBP/CAD) exchange rate has softened this morning, although it remains close to a one-year high, in spite of stronger-than-expected UK retail sales data.
At the time of writing, GBP/CAD is trading at CA$1.6825, down from last night’s high of $1.6862.
Pound (GBP) Slips despite Upbeat Sales Data
The Pound (GBP) stumbled in early European trade, despite UK retail sales smashing expectations.
British domestic sales grew by 1.2% in February, five times more than the forecast 0.2% growth. In addition, January’s sales growth was revised higher, from 0.5% to 0.9%.
Retail sales volumes increased by 1.2% in February 2023, following a rise of 0.9% in January 2023.
The increase over the month returns retail to its pre #COVID19 level.
➡️ https://t.co/cu9TWNiFtr pic.twitter.com/9VPDODb1J0
— Office for National Statistics (ONS) (@ONS) March 24, 2023
On the face of it, today’s data shows a far more resilient UK retail sector. However, sales volumes fell 0.3% in the three months to February when compared with the previous three months. In addition, food sales were up due to people cutting back on eating out and takeaways amid the squeeze on incomes.
Furthermore, the UK’s latest PMI report printed below expectations. The services sector slowed down more than anticipated, with the score dropping from 53.5 to 52.8. Meanwhile, the contraction in factory activity deepened.
The PMI release also revealed evidence that inflationary pressures are easing. Input price inflation fell to a two-year low, while other forms of inflation also trended downwards.
This could be an early indication of the expected rapid fall in UK inflation rates, thereby strengthening the argument that the Bank of England (BoE) will soon stop raising interest rates.
This disappointing data has seen Sterling slip further from the one-year high it hit against the Canadian Dollar (CAD) yesterday evening.
Canadian Dollar (CAD) Enjoys USD Correlation
Meanwhile, CAD seems to be garnering support thanks to its positive trading correlation with a strengthening US Dollar (USD).
A fall in oil prices could be limiting the crude-linked currency’s gains, however. WTI crude has slumped from $70.38 per barrel to $67.85 today, putting downward pressure on CAD.
GBP/CAD Exchange Rate Forecast: Canadian Retail Sales to Boost the ‘Loonie’?
Looking ahead, Canada’s latest retail sales report is out this afternoon. Economists expect an acceleration in sales growth, from 0.5% in December to 0.7% in January.
Such a result could indicate ongoing strength in the Canadian economy, which in turn could boost the appeal of the ‘Loonie’.
As for Sterling, markets are likely to continue digesting the latest data releases. Could the signs of a more resilient UK economy cushion the downside for GBP?
Later in the afternoon, BoE rate setter Catherine Mann is due to deliver a speech. Mann is known as one of the most hawkish members of the BoE’s Monetary Policy Committee (MPC). If she advocates further rates hikes, the Pound could climb.