The Pound Canadian Dollar exchange rate advanced on Thursday. Pound investors were relieved when Britain’s growth projections met expectations and Canadian Dollar traders anticipated Friday’s key Canadian growth data before making any moves on the currency. GBP CAD has advanced slightly from 1.6293 to around 1.6345 so far this week.
Pound (GBP) Outlook Limited until Next Week’s PMI and BoE News
Sterling has seen poor performance in recent weeks as speculation of Bank of England (BoE) policy tightening has faded and key UK ecostats like inflation and retail sales have disappointed.
As a result, investors were somewhat relieved on Wednesday when Britain’s Q2 Gross Domestic Product (GDP) projection met analyst forecasts in both major prints.
UK growth improved slightly from 0.2% to 0.3% quarter-on-quarter as expected, with year-on-year growth looking to slow from 2% to 1.7% as forecast.
As this was the week’s most influential UK dataset, some traders were relieved that it didn’t fall short of expectations. This created an opportunity for traders to buy the highly undervalued Pound from its cheap levels.
However, without strong supportive news or data, the Pound’s gains are limited and its long-term outlook is still weak. Next week’s session is likely to be comparatively more influential for long-term Pound trade.
Throughout the next week, Markit will publish its UK July PMIs. As always, particular attention will be given to the services PMI, which is due on Thursday.
Thursday won’t just see the publication of the services PMI however, as the Bank of England (BoE) will hold its July monetary policy decision, as well as publish its meeting minutes and inflation report.
Markets expect the bank will leave policy frozen, but any changes in the bank’s recent vote split on monetary policy is likely to have a notable influence on Sterling.
If less members of the Monetary Policy Committee (MPC) vote for a rate hike than in the previous meeting, Sterling is likely to see weaker trade towards the end of next week. Overall, the long-term Pound outlook still has considerable downside risks.
Canadian Dollar (CAD) Traders Anticipate Growth Report
The Canadian Dollar’s recent strong-streak ended on Wednesday, as investors hesitated to buy the currency ahead of Friday’s key Canadian Gross Domestic Product (GDP) results from May.
The ‘Loonie’ had seen sturdy trade since the Bank of Canada (BOC) hiked Canadian interest rates two weeks ago. However, without any fresh reasons to buy the ‘Loonie’, its sturdiness has faded. This helped GBP CAD to more easily recover from its recent lows this week.
Investors are also anxious ahead of the Canadian GDP report, as it is likely to indicate how justified July’s BOC rate hike was.
Investors expect Canada’s growth rate will remain at 0.2% month-on-month and improve from 3.3% to around 4.2% year-on-year. If it meets or beats expectations, the ‘Loonie’ could firm at the end of the week as investors expect the BOC won’t be having any second thoughts on its rate hike.
However, Canadian growth falls short of projections, concerns will grow that the BOC was premature in hiking Canada’s interest rates.
This would dampen the Canadian Dollar outlook, at least until further forward guidance is given by BOC officials.
GBP CAD Interbank Rate
At the time of writing this article, the Pound Canadian Dollar exchange rate traded at around 1.6355. The Canadian Dollar to Pound exchange rate trended in the region of 0.6110.
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