The Pound to Canadian Dollar (GBP/CAD) exchange rate has softened after a mixed day for UK data. In addition, the US Dollar to Canadian Dollar (USD/CAD) currency pair also recorded losses as the ‘Buck’ pauses in its recent rally.
Oil Prices Pressure Canadian Dollar Exchange Rate Lower
The Canadian Dollar has been trending lower against other currency majors of late as the price of oil dropped. The Canadian Dollar, as a commodity currency, is very closely linked to the value of crude oil—its largest export. At present, oil prices are a hot topic of debate after Saudi Arabia surprised markets with its announcement that it would be cutting oil costs.
The news offered the Canadian commodity currency little support and saw investor sentiment in the ‘Loonie’ wane. However, Canadian oil companies do have a small silver lining. Oil prices are accounted for in US Dollars and as both oil prices and the Canadian Dollar have softened in recent months, businesses have been able to gain more ‘Loonie’s’ for their ‘Buck’s’.
Economist Leslie Preston stated: ‘Several factors, including a weaker Canadian Dollar and lower discounts for Canadian crude oil, mean that the recent hit to prices received by Canadian producers is less severe than the global oil price decline suggests.’
US Crude Oil Exportation causes Oil Price Pressures
However, expectations that the US could increase its crude supplies and be the net crude exporter by 2020, has pushed oil values to a four-year low. November 27th could prove to be an interesting day for the Canadian Dollar, as the Organisation of the Petroleum Exporting Countries (OPEC) convenes to discuss the possibility of cutting production.
The meeting will be held in Vienna, Austria and discuss the current global surplus of oil and the next steps to take in the industry.
UK Wage Growth Encourages Pound Exchange Rate Higher
The UK meanwhile, saw an interesting mix of domestic data on Wednesday. The Unemployment Rate stagnated at 6.0% despite economists expecting a fall to 5.9%. However, Average Weekly Earnings rose higher than forecast, to 1.0% in the three months through September on the year. Forecasts were only for a 0.8% figure.
Bank of England Inflation Report Sees Sterling Drop
However, the Bank of England Inflation Report was less optimistic, and investors are now pricing in a UK rate hike in August 2015.
The report stated: ‘Inflation has fallen further below the MPC [Monetary Policy Committee’s] 2% target, reflecting the impact of lower food, energy and import prices and some continued drag from domestic slack. Inflation is expected to remain below the target in the near term, and is more likely than not to fall temporarily below 1% at some point over the next six months.’
Comments from BoE Governor Mark Carney in the press conference following the report release may also affect the Pound exchange rate. The GBP/CAD currency pair is presently trending at 1.7971 after depreciating by 0.45%. Meanwhile, the CAD/USD exchange rate is reaching 0.8839.
Canadian Dollar Exchange Rate Bolstered by House Price Index
The Canadian Dollar gained after the Teranet National Bank announced its House Price Index continued to grow in October. Furthermore, house prices are forecast to continue to expand in the currently robust property market. Strategist David Tulk commented: ‘The wider fundamentals–low interest rates and a respectable pace of hiring–speak to future momentum in the months ahead.’
Meanwhile, the Pound has extended its losses against other currency majors after the BoE report. BoE Governor Mark Carney held a press conference after the release in which questions were raised over interest rate hikes.
The prospect of increased borrowing costs is an event that has seen the Pound rally in previous months. However, with inflation cuts signalling a delay in increased interest rates, economists have pushed back their bets and lost sentiment in the Pound.
Governor Carney Offers Reassurance on Interest Rate Increases
Carney reassured investors that he was being vigilant on inflation in regards to interest rates, stating: ‘I’m still the only G7 [Group of Seven] Governor who has raised interest rates. I just haven’t done it here. But I also know what it is to hit an inflation target. which is what the MPC is striving to do.’
Furthermore, Carney rebuffed speculation that interest rates wouldn’t increase around the time of the general election as recent speculation has suggested.
GBP/CAD and USD/CAD Trending Lower
The Pound Sterling to Canadian Dollar exchange rate is currently trending in the region of 1.7828.
The US Dollar to Canadian Dollar exchange rate is currently trending in the region of 1.1303.
After Thursday’s solitary British data publication printed negatively, the Pound has slumped against the majority of its most traded currency rivals. The RICS House Price Balance was forecast to decline from 30% to 25%, but the actual result fell to 20%.
The Canadian Dollar, meanwhile, is generally struggling against falling oil prices. Brent crude extended losses from a four-year low amid signs that OPEC remains unwilling to reduce output to ease anxieties over a global price glut.
As traders await US labour market data, due for publication on Thursday afternoon, the US Dollar has softened against nearly all of its major peers.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound , 0.7881,
US Dollar,,Pound , 0.6317,
Canadian Dollar,,Pound, 0.5589,
Australian Dollar,,Pound, 0.5516,
New Zealand Dollar,,Pound, 0.4961,
[/table]
