The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate advanced to 1.92 after GDP data out of the North American nation came in below forecasts.
Canada’s Gross Domestic Product (GDP) contracted in November as manufacturing dropped the most since January 2009 and as the economy suffered from declines in mining and oil and gas extraction.
According to Statistics Canada the nation’s GDP contracted by -0.2% on a month on month basis, a figure that was worse than the unchanged 0.3% forecast.
Earlier the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate surged to a new six year high on Friday as oil prices fell yet again.
Against the US Dollar (CAD/USD) the ‘Loonie’ declined fell to 78 cents and against the Euro (CAD/EUR) the currency fell to a session low of 0.695.
Falling oil prices continue to hammer the Canadian currency lower and more losses are forecast as West Texas Intermediate slipped close to just $40 per barrel and Brent Crude weakened to $49 per barrel.
‘As oil prices move lower, this only exacerbates the impact on the Canadian Dollar due to the Bank of Canada’s increased likelihood to cut rates with falling oil,’ said an analyst from the Toronto based Knightsbridge Foreign Exchange.
Oil prices slid again on Friday as analysts predict that production of the commodity will remain high and that producers are still not showing signs of paring back. The surge in productivity has been a major contributor to the global supply surge that has sent oil falling.
As Canada is a major producer of oil, its economy and currency have received a hammering and as a result this afternoons Canadian Gross Domestic Product (GDP) report is likely to disappoint the markets. Economists are predicting that GDP remained unchanged in the fourth quarter from the 0.3% figure recorded in the third quarter, a weaker than forecast number and we can expect the currency to fall even further.
Largest 2-Year Decline Ever
Over the past two years the ‘Loonie’ has fallen by 19.5%, in 2013 the CAD/USD exchange rate had reached parity.
‘That is the largest two-year decline in the Canadian dollar ever, which last I checked is a long period of time. It’s even larger than the deep drop in the late ’70s when Canadian inflation was running especially hot, and there were very real fiscal concerns, as well as an impending referendum in Quebec,’ said Doug Porter, the chief economist at BMO in a note to clients.
The Pound meanwhile found support from data, which showed that UK banks approved more mortgages than forecast in December suggesting that the slowdown seen in the nation’s housing market is beginning to bottom out.
