The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate rallied by over 0.15% on Wednesday as strong US fundamentals diminished demand for higher-risk assets.
Riskier currencies like the Canadian Dollar, ‘Aussie’ and ‘Kiwi’ all declined against peers like the Pound and US Dollar as the odds of the Federal Reserve bringing in an interest rate increase sooner than currently expected jumped in the wake of impressive US growth data.
The US economy was shown to have expanded by 4.0% in the second quarter of the year following contraction of -2.1% in the first.
The first quarter figure had been positively revised from an initial estimate for contraction of 2.9%.
Meanwhile Canada’s Industrial Product Price index unexpectedly slid by -0.1% in June on a month-on-month basis rather than climbing by the 0.2% anticipated. This followed a -0.5% decline in May.
This was the third consecutive monthly drop in the IPPI measure. 21 major commodity groups are assessed in the calculation of this measure and only 4 registered an increase.
In the report it was stated; ‘Some Canadian producers who export their products report their prices in US dollars. Consequently, the 0.6% increase in the value of the Canadian dollar relative to the US dollar may have had the effect of lowering the IPPI. Without the measurable effect of the exchange rate, the IPPI would have been unchanged instead of decreasing 0.1%.’
Conversely, Canada’s Raw Materials Price Index leapt by almost twice the forecast amount in June, surging by 1.1% instead of the 0.6% predicted. This followed a positively revised decline of -0.3% in May.
Pound Sterling to Canadian Dollar Exchange Rate Forecast
If the Federal Open Market Committee interest rate decision and accompanying policy statement is slightly more hawkish in tone than usual, keeping hopes of a Fed rate-hike high, demand for higher-risk assets could be tempered even more and the Pound may consolidate its gains.
Sterling could also extend its advance against the Canadian Dollar if the UK’s GfK Consumer Confidence survey records the improvement anticipated.
Of course, investors will also be looking ahead at tomorrow’s Canadian Gross Domestic Product figures. The nation’s economy is believed to have expanded by 0.3% in May, month-on-month, following expansion of 0.1% in April.
A disappointing result, which would indicate that the Canadian economy is lagging even further behind that of the neighbouring US, could drag the ‘Loonie’ lower against its peers. The economy is expected to have expanded by 2.3% on the year.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could also be affected by Canada’s average weekly earnings data.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Canadian Dollar,
,Pound Sterling,0.5431,
Canadian Dollar,,US Dollar,0.9181,
Canadian Dollar,,Euro,0.6862,
Canadian Dollar,,Australian Dollar,0.9830,
Canadian Dollar,,New Zealand Dollar,1.0821,
US Dollar,,Canadian Dollar ,1.0885,
Pound Sterling,,Canadian Dollar,1.8407,
Euro,,Canadian Dollar,1.4573,
Australian Dollar,,Canadian Dollar,1.0170,
New Zealand Dollar,,Canadian Dollar,0.9227,
[/table]
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