The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate began European trading on Monday little-changed.
At the close of last week the pairing softened as the Pound lost appeal in the face of disappointing UK fundamentals and easing rate-hike bets.
The fact that Canada’s retail sales report was considerably stronger than the UK’s also saw the GBP/CAD exchange rate decline.
A sharp jump in auto sales helped total Canadian retail sales advance by 0.7% in May. This increase took sales to a new record level.
According to economist Bill Adams; ‘Canada’s labour market indicators were still soft in the second quarter, but activity indicators have clearly turned a corner, the most recent evidence of this being May’s strong retail sales. Canada’s second quarter upswing is a sign that the Canadian economy was not nearly as weak as the winter’s data suggested.’
In comparison, UK retail sales declined by -0.5% in May and were shown to have recovered by just 0.1% in June.
This, coupled with the fact that the Bank of England was unanimous in its decision to leave interest rates on hold, kept the Pound Sterling to Canadian Dollar exchange rate trending slightly lower into the weekend.
With no pertinent economic reports for either the UK or Canada on the cards for today, the GBP/CAD pairing is likely to trend in a narrow range.
However, while the Canadian Dollar is performing well against the Pound, the British asset is putting on a less impressive show against the US Dollar.
Given that the latest US reports all indicate that the world’s largest economy staged an impressive rebound in the second quarter of the year, the odds of the Federal Reserve increasing interest rates are rising.
Meanwhile, the Bank of Canada is maintaining a dovish stance and slashed its domestic growth projections earlier in the month.
These signs that the US economy is outperforming neighbouring Canada have pushed the US Dollar to Canadian Dollar (USD/CAD) exchange rate to a five-week high.
In the opinion of analyst Dean Popplewell; ‘The market is positioning itself for a busy US economic calendar next week. The ‘Loonie’ has little support from the Canadian economic agenda until the end of the month, when we get GDP data for May. It remains at the mercy of the Dollar’s moves.’
Pound to Canadian Dollar (GBP/CAD) Forecast
The Canadian GDP figures, due out on Thursday 31st July, are expected to show month-on-month expansion of 0.3% in May and year-on-year growth of 2.3%.
On target or above target results could help the Canadian Dollar push higher against the Pound. Of the UK reports scheduled for publication this week, only tomorrow’s Mortgage Approvals figure and Thursday’s GfK Consumer Confidence data are the only ones likely to inspire much market movement.
Other Canadian reports to be aware of in the days ahead include the nation’s Industrial Price Index, Average Weekly Earnings figures and RBC Canadian Manufacturing PMI.
If these reports all show improvement, we forecast that the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could edge lower over the next five days.
Investors with an interest in the US Dollar to Canadian Dollar exchange rate will also be focusing on the Federal Open Market Committee’s policy meeting.
Any sign that the Fed could be revising its stance on the timeline for increasing interest rates would push the US Dollar higher against its peers.
UPDATED 09:55 GMT 30 July, 2014
Canadian News Could Cause GBP/CAD Movement
After several days of quiet trading the Pound Sterling Canadian Dollar exchange rate could finally be about to experience a bit of volatility.
Although this morning’s UK Lloyds Business Barometer, which advanced slightly from 51 t0 52, is unlikely to have much impact on the GBP/CAD pairing, Canada’s Industrial Product Price and Raw Materials Price indexes could be of interest.
Industrial product prices in Canada are expected to have risen from -0.5% in May to to 0.2% in June while the nation’s raw materials price index is forecast to have risen by 0.6%, wiping out the previous month’s -0.4% decline.
Of course, the biggest causes of currency market movement in the hours ahead are likely to be the US second quarter growth data, ADP Employment Change figure and Federal Open Market Committee interest rate decision.
Any developments which support the case for the Fed increasing borrowing costs in the near future could push higher-risk assets like the Canadian Dollar lower.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trading in the region of 1.8401.
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,0.5445,
Canadian Dollar,,US Dollar,0.9251,
Canadian Dollar,,Euro,0.6881,
Canadian Dollar,,Australian Dollar,0.9842,
Canadian Dollar,,New Zealand Dollar,1.0813,
US Dollar,,Canadian Dollar ,1.0812,
Pound Sterling,,Canadian Dollar,1.8352,
Euro,,Canadian Dollar,1.4524,
Australian Dollar,,Canadian Dollar,1.0152,
New Zealand Dollar,,Canadian Dollar,0.9219,
[/table]
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