Canadian Dollar (CAD) Drifts Lower on Soft Housing Stats
Both the Pound Sterling to Canadian Dollar (GBP/CAD) and US Dollar to Canadian Dollar (USD/CAD) exchange rates were trending in a stronger position following the publication of yesterday’s disappointing Canadian Housing Starts report.
While the Canadian Dollar advanced against the majority of its currency counterparts at the close of last week as Canadian employment data smashed forecasts, the currency has since given up much of its gains.
Floundering oil prices and the diverging policy outlooks of the US and Canada pressured the Canadian lower on Monday and the GBP/CAD and USD/CAD exchange rates extended gains as a result of disappointing domestic data.
Bank of Canada Governor Stephen Poloz stated many months ago that Canada’s housing market could be in for a ‘soft landing’ – and the latest property data appears to support this view.
Figures compiled by the Canada Mortgage and Housing Corp showed that, on a seasonally adjusted basis, the number of housing starts issued fell from 197,355 units in September to 183,604 units in October.
Economists had forecast an increase to 200,000.
The data saw economist Robert Kavcic comment; ‘While recent home prices trends are starting to raise some eyebrows, there’s little concern about overbuilding in Canada, with housing starts trending near fundamental requirements.’
GBP/CAD, USD/CAD Exchange Rates Gain
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate also advanced as a result of the British Retail Consortium’s Like-for-Like Sales report for October.
A decline of -0.5% had been expected to follow the -2.1% year-on-year figure recorded in October.
However, sales were flat on the year. Although Halloween related shopping gave sales a boost, lacklustre clothing sales and falling food sales prevented a gain.
As the report was more positive than expected, the Pound rallied against the majority of its currency counterparts, including the Canadian Dollar.
Meanwhile, the US Dollar to Canadian Dollar (USD/CAD) exchange rate advanced as the US Dollar recovered from the decline recorded following the publication of the US Non Farm Payrolls report.
In the opinion of a currency strategist from Scotiabank; ‘We could be entering a period of rest here where several currencies and several asset classes have made really large moves and now it’s time to catch your breath and rethink where things should be valued. But certainly, that fall in oil prices is a material shift for the Canadian Dollar.’
GBP/CAD, USD/CAD Exchange Rate Forecast
As the week progresses, movement in the GBP/CAD and USD/CAD exchange rates could be caused by Canada’s New Housing Price Index (out on Thursday) and Manufacturing Shipments figure (out on Friday).
Investors with an interest in the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate will also be focusing on the UK’s employment data and the Bank of England’s inflation report – scheduled for publication on Wednesday.
Meanwhile, US Dollar to Canadian Dollar (USD/CAD) traders will be holding out for Friday and the publication of US retail sales figures and the University of Michigan Confidence Index.
Pound Pressured by BoE Inflation Expectations
As trading continued on Tuesday the Pound went on to soften modestly against the Canadian Dollar as investors bet that Wednesday’s Bank of England inflation report will contain negative revisions to the UK’s growth and inflation forecasts.
If that proves to be the case, it will seriously lessen the odds of the BoE increasing interest rates before the second half of next year and could drive the Pound Sterling exchange rate lower.
The GBP/CAD pairing fell by 0.15%.
A lack of US data left the US Dollar to Canadian Dollar (USD/CAD) exchange rate little changed.
USD/CAD Stronger, GBP/CAD Movement Forecast
On Wednesday the US Dollar to Canadian Dollar (USD/CAD) exchange rate was trending in a stronger position.
However, the Pound Sterling to US Dollar (GBP/USD) exchange rate softened slightly ahead of the publication of the UK’s employment report. If UK wage growth under performs, the Pound could extend declines against its Canadian cousin.
US Wholesale inventories figures will also be of interest.
BoE Cuts Growth and Inflation Expectations, Sterling Declines
As the European session progressed on Wednesday the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate fell by over 0.7%.
The steep downturn in the British currency occurred as a result of the Bank of England negatively revising its growth and inflation expectations for the UK.
In light of their commentary, it’s now highly unlikely that the central bank will increase interest rates before the second half of next year.
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,0.5534,
Canadian Dollar,,US Dollar,0.8784,
Canadian Dollar,,Euro,0.7078,
Canadian Dollar,,Australian Dollar,1.0196,
Canadian Dollar,,New Zealand Dollar,1.1298,
US Dollar,,Canadian Dollar ,1.1385,
Pound Sterling,,Canadian Dollar,1.8052,
Euro,,Canadian Dollar,1.4130,
Australian Dollar,,Canadian Dollar,0.9799,
New Zealand Dollar,,Canadian Dollar,0.8813,
[/table]
