The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate fell in the second half of Tuesday’s session as UK Manufacturing Production fell rather than grew in line with forecasts. Meanwhile, the Canadian Dollar to US Dollar (CAD/USD) exchange rate recorded gains after safe-haven demand for the Japanese Yen (JPY) increased as equities and commodity prices fell.
UK Manufacturing Production shrank on the year from 2.2% to 1.7% in October as a result of Eurozone fatigue.
Markit economist Chris Williamson stated: ‘A sharp drop in factory output in October is a timely reminder that policymakers cannot be complacent about the UK’s recent run of strong growth persisting into the New Year.’
Earlier… The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate made modest gains in the early part of Tuesday’s European session after British Retail Consortium (BRC) Like-For-Like Sales increased more than economists’ had forecast.
The recent ‘Black Friday’ event which saw many stores discount products for a one-off sale before Christmas, encouraged retail sales to climb in November according to the BRC.
BRC Director General Helen Dickinson commented: ‘These are encouraging signs in the run-up to Christmas, when consumers will likely want to push the boat out even more.’
The Pound Sterling to Canadian Dollar exchange rate could fluctuate further after the release of UK Industrial Production and Manufacturing Production later in the session.
Meanwhile, the Canadian Dollar to US Dollar (CAD/USD) exchange rate advanced after Atlanta Federal Reserve President Dennis Lockhart stated that the central bank could afford to be patient before hiking interest rates in the US. Lockhart suggested ‘mid year [2015] or later’ could be likely.
Morgan Stanley Forecasts Pressure Crude Oil Lower, Dragging Canadian Dollar Exchange Rate Down with It
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate advanced significantly in the second half of Monday’s European session as oil prices reached a five-year low following Morgan Stanley’s forecasts.
Morgan Stanley suggested that crude oil prices could dip to $53 per barrel in 2015. Oil prices have tumbled this year as a global surplus pushes prices lower. Morgan Stanley’s base case estimates have fallen from $98 to $70, with the possibility of the $53 barrel average.
Analysts Adam Longson and Elizabeth Volynsky commented: ‘Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015. Prices are set up to fall in the first half of 2015.’
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Precarious on Oil Speculation
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is remaining in a narrow range in Monday’s session ahead of Lloyds UK Employment Confidence and Canadian Housing Starts and Building Permits. Meanwhile, the Canadian Dollar to US Dollar (CAD/USD) exchange rate extended last week’s losses after Canadian employment numbers disappointed, while the US labour market strengthened.
The Canadian Dollar has added pressure from weak oil prices which are currently forecast to be heading for a five-year low.
Morgan Stanley commented: ‘Near term outlook for oil prices is still challenging, With OPEC on the sidelines, oil prices face their greatest threat since 2009 and appear on track for an extremely volatile 2015. Without intervention, physical markets and and prices will face serious pressure, with 2Q15 likely marking the peak period of dislocation.’
Morgan Stanley continued: ‘However, as outlined in our 2015 oil outlook, oversupply is likely exaggerated and the marker may be complacent about upside risks.’
Bank of England (BoE) representatives Andrew Gracie and Martin Weale are expected to speak on Monday which could cause movement for the GBP/CAD exchange rate.
Canadian Unemployment Causes Five-Year Low CAD Exchange Rate
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate gained on Friday after Canadian Net Change in Employment figures showed job losses in November. Furthermore, the nation’s Unemployment Rate crept higher from 6.5% to 6.6%.
The Canadian Dollar to US Dollar (CAD/USD) exchange rate sank to its lowest level in five years as employment fell by 10,700 in November, showing signs of weakness in the economy after two solid months of job gains.
As highlighted by Bloomberg; ‘Employment declined after jumps of 43,100 and 74,100 the last two months.’
Forex strategist Camilla Sutton stated: ‘The focus is going to be on the strong upside release in the US and how that’s likely to fuel strong US Dollar and pull in expectations for the first rate hike.’
In contrast, US employment surged when Change in Non-Farm Payrolls figures showed a massive 321,000 job creation, smashing the 225,000 job gain forecast.
Sutton continued: ‘You have to put the weak Canadian report into perspective. We’ve had two months of significant job gains, and one month doesn’t reverse that.’
Similarly, Scotiabank said of the jobs data; ‘This seems like a natural pullback following substantial employment gains in September and October. Given the volatility that we’ve seen in recent releases, we caution against drawing too many conclusions on this one data point.’
However, even if we disregard the employment stats, falling oil prices have consistently pressured the Canadian Dollar lower—a circumstance that could continue into next week’s trading.
As observed by the Vancouver Sun; ‘The January crude contract was 57 cents lower to US$66.81 a barrel on the New York Mercantile Exchange. Crude prices have plunged around 35 per cent since mid-summer because of lower demand and a glut of supply, due in large measure to greatly increased production in the US Midwest. On Thursday, data from the Energy Information Administration showed that proved oil reserves rose nine per cent last year, a fifth consecutive year of increases.’
Pound Sterling to Canadian Dollar (GBP/CAD), Canadian Dollar to US Dollar (CAD/USD) Exchange Rate Forecasts
So, what key events will be affecting the Pound Sterling to Canadian Dollar (GBP/CAD) and Canadian Dollar to US Dollar (CAD/USD) exchange rates next week?
Both the UK and Canada will publish only moderately significant data in the week ahead, leaving most of the heavy lifting for the US.
Monday will see the release of the Confederation of British Industry’s Trends Total Orders and Trends Selling Prices, Canadian Housing Starts and Building Permits and US Labour Market Conditions Index Change.
Last month’s Canadian Housing Starts data saw Bloomberg state; ‘Work began on 183,604 units at a seasonally adjusted annual pace, down 7 percent from September, Ottawa-based Canada Mortgage & Housing Corp […] Economists forecast a reading of 200,000, according to the median of 16 responses to a Bloomberg News survey. The report may ease concern from Finance Minister Joe Oliver and Bank of Canada Governor Stephen Poloz about signs of overbuilding of condos in Toronto and Vancouver. Poloz has said the strains from rising prices and consumer debts should ease over the next few years as economic growth boosts incomes relative to debt loads.’
Tuesday will be a quiet day for Canadian ecostats but the UK will release Industrial and Manufacturing Production figures and the US is publishing NFIB Small Business Optimism.
Furthermore, Atlanta Federal Reserve President Dennis Lockhart will be speaking about monetary policy. Any hawkish remarks by the central banker could see the US Dollar extend its gains from this week.
Wednesday’s most influential events will be UK Trade Balance Figures and the US Monthly Budget Statement.
On Thursday the US Advance Retail Sales stats are out. Monthly growth of 0.3% is expected in November. US Initial Jobless Claims and Continuing Claims figures will also be of interest. The influential US data continues on Friday with University of Michigan Confidence index.
Any global developments or adjustment to oil prices could cause Pound Sterling to Canadian Dollar (GBP/CAD) and Canadian Dollar to US Dollar (CAD/USD) exchange rate movement, as could any talks from the Bank of England (BoE), Bank of Canada (BOC) or Federal Reserve.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Canadian Dollar , 1.7829,
US Dollar,,Canadian Dollar , 1.1448,
Euro,,Canadian Dollar , 1.4035,
Australian Dollar,,Canadian Dollar , 0.9482,
New Zealand Dollar,,Canadian Dollar , 0.8739,
[/table]
