While Sterling was stuck trading in a narrow range against several of its peers on Wednesday, the Pound to Canadian Dollar (GBP/CAD) exchange rate fell by 0.25% over the course of European trading.
With the Bank of England’s rate decision due to take place tomorrow, the Pound lost some of its appeal as a result of UK House Price and Sales Price reports.
The Sales Price report detailed the steepest decline in annual sales growth in 16-months while the UK House Price report showed that house prices fell by double the amount expected in June, month-on-month.
Sterling came under additional pressure after Goldman Sachs officials asserted that the strength of the British asset could undermine the nation’s economic performance.
The Pound recently hit a 21-month high against the Euro and an over five-year high against the US Dollar. Although BoE policymakers have previously commented on the potentially detrimental impact of a strong local currency, the Pound’s upward momentum has continued.
According to Bloomberg News, an economist with Goldman Sachs recently stated; ‘The currency is up on a trade weighted basis almost 10% in the last year. That leads us to expect that while growth will remain strong, it will moderate to some extent as the year goes through’.
Further modest declines in the GBP/CAD pairing occurred following the publication of Canadian Housing Starts figures.
The level of housing starts in the nation climbed unexpectedly in June.
Although industry experts have said that Canada’s hot housing market is cooling, recent reports have contradicted this view.
While May’s Housing Starts figure was revised lower, starts in June rose from 196,993 units to 198,185 units.
Economists had expected that the Canada Mortgage Housing Corp figures would show a figure of 190,000 units.
Although last week’s Canadian growth data fell slightly shy of expected levels, the nation’s Manufacturing PMI and Trade Balance figures exceeded expectations.
Investors will be hoping that Friday’s Canadian employment data will also surprise to the upside.
It has been forecast that the Canadian economy added 24,000 positions in June, following an increase of 25,800 jobs in May. This result would see the Canadian Unemployment Rare hold at 7.0%.
Canadian employment figures have shown themselves to be very volatile in the past so an unexpected result could trigger ‘Loonie’ fluctuations.
As the week continues movement in the Pound to Canadian Dollar (GBP/CAD) exchange rate could be caused by the BoE meeting, UK Trade Data, Canada’s New Housing Price Index and UK Construction Output figures.
If UK construction output is shown to have increased by 0.9% in May, as economists expect, it would help to restore confidence in the resilience of the UK’s economic recovery and could help the Pound end the week on a high.
UPDATED 22:30 GMT 09 July, 2014
GBP/CAD Holds Declines, USD/CAD Shifts Lower
Both the Pound to Canadian Dollar (GBP/CAD) and USD/CAD exchange rates declined during the North American session.
While the Canadian Dollar was modestly boosted by the stronger-than-anticipated domestic Housing Starts report, it was the FOMC meeting minutes which had the biggest impact on exchange rate movement.
The minutes stated; ‘Signs of increased risk-taking were viewed by some participants as an indication that market participants were not factoring in sufficient uncertainty about the path of the economy and monetary policy’.
Although policy makers lowered their US growth projections, they did raise their interest-rate hike forecasts. It is now envisaged that the main rate will have been increased to 1.13 by the end of next year. This was up modestly from the 1.0 estimated in March.
Thursday’s Canadian New Housing Price Index is expected to show a month-on-month increase of 0.2% in May. A surprising result could cause movement in the Pound to Canadian Dollar (GBP/CAD) exchange rate.
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,0.5481,
Canadian Dollar,,US Dollar,0.9378,
Canadian Dollar,,Euro,0.6888,
Canadian Dollar,,Australian Dollar,0.9978,
Canadian Dollar,,New Zealand Dollar,1.0659,
US Dollar,,Canadian Dollar ,1.0669,
Pound Sterling,,Canadian Dollar,1.8248,
Euro,,Canadian Dollar,1.4500,
Australian Dollar,,Canadian Dollar,1.0022,
New Zealand Dollar,,Canadian Dollar,0.9389,
[/table]
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