The Canadian Dollar (CAD) fell to a four-month low against the US Dollar (USD) and weakened against both the Euro (EUR) and Pound Sterling (GBP) on Tuesday after housing starts data disappointed.
According to the data released by the Canadian Mortgage and Housing Corporation, the number of yearly housing starts declined from July’s figure of 199,800 units to 192,400 in August.
The data was worse than the 195,000 forecast by analysts.
The figure was also the smallest seen in five months.
‘August’s housing starts were a bit softer than expected, particularly after the solid building permit applications reported yesterday by Statistics Canada. That data showed record-high residential building permits were issued in July, adding to strong permit increases in May and June,’ said an economist from National Bank.
Also weighing upon the Canadian Dollar was the fall in Crude oil to below the $100 per barrel level.
The strength of the US Dollar also caused other commodity prices to slump to their lowest levels in eight months, something that is weighing heavily upon the commodity based currencies such as the ‘Loonie’, South African Rand (ZAR) and Aussie Dollar (AUD).
The US Dollar was able to advance further against the ‘Loonie’ to its best level since April.
The Pound was able to recover lost ground against the ‘Loonie’ after finding support from better than forecast Industrial production data and comments made by Bank of England Governor Mark Carney.
In a speech to trade unionists, Mr. Carney warned Scotland that a currency union would be ‘incompatible with sovereignty’ if it chooses to leave the UK at next week’s referendum vote. Prior to the comments, the Pound was under sustained pressure after a poll showed that the independence vote result would be far closer than initially expected. He also said that interest rates are likely to rise in spring 2015.
Canadian Dollar exchange rate forecast
The Canadian Dollar is forecast to remain under pressure against the US Dollar as the ‘Greenback’ remains supported by increased expectations that the Central Bank will raise interest rates sooner than expected and end its quantitative easing programme by October.
The ‘Loonie’ could resume pressing higher against the Pound as uncertainty over the Scottish Independence vote is sure to continue weigh heavily upon the UK currency.
Against the Euro, the ‘Loonie’ could recover ground if data out of the Eurozone continues to disappoint the markets. Investors will be keeping an eye out for Thursday’s German and French inflation data.
UPDATE
The Canadian Dollar (CAD) exchange rate recovered some of Tuesday’s losses against the Pound during the European session as Sterling came under pressure once again.
However, the CAD/USD exchange rate remained trending around a 4-month low as the diverging rate outlooks of the Federal Reserve and Bank of Canada reduced the appeal of the ‘Loonie’.
Later today the Canadian Dollar could experience modest movement as a result of Canada’s Capacity Utilisation data for the second quarter. However, volatility in the commodity-driven currency is far more likely to be occassioned tomorrow when the domestic New Housing Price index is issued.
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,0.5643 ,
Canadian Dollar,,US Dollar,0.9088 ,
Canadian Dollar,,Euro,0.7037 ,
Canadian Dollar,,Australian Dollar,0.9857,
Canadian Dollar,,New Zealand Dollar,1.0999 ,
US Dollar,,Canadian Dollar,1.1003 ,
Pound Sterling,,Canadian Dollar,1.7721 ,
Euro,,Canadian Dollar,1.4207 ,
Australian Dollar,,Canadian Dollar,1.0144 ,
New Zealand Dollar,,Canadian Dollar,0.9091 ,
[/table]
