Oil worries continue to dog the ‘Loonie’ (CAD) today in spite of an improved Canadian Consumer Price Index as the GBP/CAD exchange rate rises on a UK Public Sector Net Borrowing surplus.
Crashing Oil Prices Hampered Canadian Dollar (CAD), Weak UK Retail Sales Prevent Pound from Capitalising
Tuesday’s Pound (GBP) boost on the back of an unexpected improvement in the UK Consumer Price Index, which had clocked in at 0.1% instead of the forecast 0%, could not ultimately sustain itself. Investor confidence that the domestic economy had entered a state of improvement, thus increasing the chances that a Bank of England (BoE) interest rate rise might occur before the end of the year, soon began to decline amidst economists’ comments that the figure was in fact anomalous. Decreased Retail Sales yesterday served to underline those warnings, pulling the GBP/CAD exchange rate down to 2.0548 and setting it on a general downtrend throughout the rest of the day.
With the Chinese stock market hitting a three-week low on Tuesday and reigniting concerns over the health of the world’s second largest economy, a further downturn for commodity values began. In response to a contagious and increasing panic across markets on Thursday US crude plunged to $40.35, its lowest level since 2009, with Brent sliding to $46.56. Naturally this did nothing to help the soft ‘Loonie’ (CAD), although the GBP/CAD pairing was held down by the similarly poor performance of Sterling.
Increase on Canadian CPI Proves Insufficient as UK Data Strengthens Pound to Hold up GBP/CAD Pairing
The UK Public Sector Net Borrowing figure revealed a surplus of 2.07 billion Pounds today, rather than a deficit as had been forecast. As the first July surplus in public finances since 2012 this gave Sterling some limited support this morning, with the GBP/CAD exchange rate ultimately failing to regain the ground it had ceded over the last day.
Although the Canadian Consumer Price Index came in as forecast, showing an increase in inflation on the previous month, this was nowhere near strong enough to outweigh the effects of foreign data and shore up the ‘Loonie’. As a far more severe contraction than anticipated was apparent on this morning’s Chinese Manufacturing PMI, the commodity market slumped yet again, the price of oil taking another hit. Brent crude in particular suffered from this revelation, falling to $46.42 a barrel, which remains above its lowest point of the year, nevertheless the potential remains for events to drive this down further.
GBP/CAD Exchange Rate Forecast: Canadian Dollar to Remain Fragile, Pound Could See Stronger Boost in Coming Days
Greater gains could be in store for the Pound on Tuesday if the July BBA Loans for House Purchase buck the current trends to demonstrate some positivity on the state of the UK housing market, and consequently its economy. Later in the week the Consumer Confidence Survey and GDP could also spur some distinct movement for the GBP/CAD pairing, although it remains doubtful that the ‘Loonie’ would be in a position to capitalise on any Pound weakness.
Developments in Asia and the outlook of oil prices in the coming week are likely to be the main prompts for activity on the Canadian Dollar, with any particular improvement for the situation in the short-term seeming somewhat unlikely as the markets currently stand.
Current GBP, CAD Exchange Rates
At time of writing the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is rising in the range of 2.0582, with the Canadian Dollar to Pound Sterling (CAD/GBP) pairing slipping at 0.4854.
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