The Pound to Canadian Dollar (GBP/CAD) exchange rate has been trending in a narrow range at the start of Tuesday’s European session ahead of UK BBA Loans for House Purchase figures.
In addition, Bank of England Governor Mark Carney will also be speaking in London which could see massive swings in the Pound exchange rate. Wednesday’s UK Gross Domestic Product (GDP) figures are also of high influence for the Pound and are currently expected to stagnate in line with economists’ expectations.
The Pound to Canadian Dollar (GBP/CAD) exchange rate advanced strongly on Monday as market attention turned to Canadian GDP data due later in the week and a meeting of OPEC.
Oil prices continue to fall and as Canada is one of the worlds leading oil exporters the nations economy and currency are impacted by price movements. Economists are eager to see whether OPEC will announce a reduction in production as a cut would likely send prices higher.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate made gains at the beginning of the week ahead of Bank of England (BoE) hawk Ian McCafferty releasing text. The text will contain remarks made at the internal central bank business surveys workshop on November 20th.
Any hawkish remarks from the central bank could bolster the Pound higher. Meanwhile, Canada will experience a data-free day which could see the ‘Loonie’ trading softer. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate had an interesting ride this week with Friday seeing quite dramatic movement in the currency pair.
The Pound sank as UK politics became unstable and the Canadian Dollar soared on positive data—the GBP/CAD exchange rate declined by 0.79% during Friday’s trading session.
Pound Sterling (GBP) Exchange Rate Softened after UKIP’s Win
So, what happened? The Pound posted widespread declines when political party UKIP gained its second place in parliament—a move that some hadn’t anticipated. As we edge closer to May’s general election it is extremely likely that the Pound Sterling exchange rate will fluctuate significantly on the back of political uncertainty.
Meanwhile, Canada’s Consumer Price Index (CPI) surprised everyone when it jumped by more than forecast. Predictions put inflation rising from 2.0% to 2.1% on an annual basis. However, the actual figure came in at 2.4%. As a result the ‘Loonie’ rose against other majors, reclaiming lost ground from the recent drop in oil prices.
While the Canadian Dollar advanced on both the Pound and US Dollar after the CPI figures were published, industry experts are predicting further weakness in the CAD/USD pairing.
In the view of Ross Marowits; ‘Although the Canadian Dollar has lost almost 12 per cent of its value against its US counterpart since falling below parity in February 2013, currency watchers expect a continued depreciation of between 4.5 and seven per cent by next summer.’
Industry expert Paul Taylor also stated; ‘If [the Canadian Dollar] does as we forecast and move further from 88 cents to 82 or 84, there’s money left on the table for Canadian investors who don’t have exposure to US equities […] the most predictable bets as we go forward is that the US Dollar will continue to firm and that, in part, the euro and the Yen will continue to weaken.’
CPI Jump Sees Canadian Dollar (CAD) Exchange Rate Gains
The Bank of Canada (BOC) had expected inflation to struggle in the next few years but following this upturn in consumer price gains, pressure is mounting on the central bank to revise its monetary stimulus.
According to Scotiabank; ‘The bigger surprise is that headline inflation managed to stay in positive territory on a month-over-month basis despite falling commodity prices.’
Going into next week, Friday’s developments may continue to weigh heavily on the Pound while supporting the Canadian Dollar.
Monday will be a quiet day for both the UK and Canada in terms of domestic data. Tuesday, however, sees the UK publish Nationwide House Prices followed by BBA Loans for House Purchase—the latter report is most likely to affect the Pound Sterling exchange rate.
Canadian Retail Sales come halfway through the session and are expected to grow by 0.5% in September after August’s -0.3% contraction. While Wednesday will be a quiet data-day for the Canadian economy, the Pound exchange rate could swing on the release of UK Gross Domestic Product (GDP) figures.
Another Influential Friday Forecast for the GBP/CAD Exchange Rate
While Thursday remains relatively quiet, the GBP/CAD relationship could heat up on Friday when the UK releases the GFK Consumer Confidence Survey and Canada publishes its own Gross Domestic Product figures.
After Friday’s strong performance by the Canadian Dollar, all eyes will be on the Canadian GDP figures as the most significant domestic data next week. In addition, any global developments or statements by the Bank of England (BoE) or Bank of Canada could shake the GBP/CAD exchange rate.
