The GBP CAD rate remains delicately poised. Data releases take on added significance in such a situation, so this week’s session could be a tale of two sets of inflation figures.
Foreign Currency Market Update – GBP / CAD Update
GBP CAD’s recovery, following its near-term low of 1.5545, which it broke down to in the middle part of last month, has continued over the past week. This saw the pair trade up to an intra-week high of 1.5843 on Friday. The failure of this move to eclipse the February 3rd high of 1.5869 provided some reason for concern for clients needing to purchase Canadian Dollars, however there are marked signs that the pair is staging a mini-revival. It’s far too early to call this a new uptrend – consecutive closes above last October’s 15-month high of 1.6391 would be required to do this – however, there are certainly more reasons for optimism for CAD buyers than was the case in the middle part of January.
In a very quiet seven days for Canadian data releases, last week’s highlight came in the form of Wednesday’s Housing Starts data for January. The Figure printed at 197,900, slightly down from December’s counterpart number of 199,900, but better than the 194,000 which analysts had expected. Meanwhile, on the other side of the Atlantic, there was a glut of UK data releases. Thursday saw the Bank of England announce a £50bn increase to its asset purchase scheme. Ordinarily, analysts would expect such a move to hurt the Pound, as investors fretted about the effect an increase in the UK’s money supply would have on the relative value of Sterling. However, the GBP CAD exchange rate held up well in the aftermath of the announcement, suggesting that market participants had been expecting the move. Other UK data of note was mixed in tone, with weaker than anticipated UK Industrial Production figures for December, also released on Thursday, showing at -3.3%. British Trade Balance numbers for December provided further reason for concern, whilst Thursday afternoon’s NIESR GDP Estimate printed at -0.2%, suggesting that the UK’s fragile economy may be hurtling towards a double dip recession.
*Denotes the importance of the data item *** being the highest level.
*** Tuesday’s UK CPI Inflation data for January is expected to show a marked drop from December’s 4.2%, to print at an annualised 3.6%.
*** Wednesday morning’s UK Unemployment figures for January will be closely-watched by analysts. An increase in British jobless claims of 3,000 is expected.
*** Wednesday afternoon sees the release of the latest Bank of England Inflation Report. Investors will be monitoring the report for clues on the future direction of British monetary policy.
** Friday morning’s UK Retail Sales numbers for January are expected to show a monthly contraction of 0.3%, following December’s positive 0.6% showing, providing the potential for selling pressure on the Pound.
** The latest Canadian Manufacturing Shipments data is released at lunchtime on Thursday – a significant figure for Canada’s export-driven economy.
*** January’s Canadian Consumer Price Index data is expected to show at the same 2.3% level as December’s counterpart number, when it’s released at midday Friday.
The GBP CAD rate remains delicately poised. Data releases take on added significance in such a situation, so this week’s session could be a tale of two sets of inflation figures, with Tuesday’s release of CPI inflation data in the UK and Canada’s counterpart data release coming on Friday. Any hint of a drop off in the rate of price rises in the UK or Canadian economies would have the potential to alter investors’ expectations on the direction of future interest rate policies from the Bank of England and the Bank of Canada. This could in turn alter the relative levels for the Pound and the Canadian Dollar, causing the GBP CAD exchange rate to trend upwards towards last Autumn’s high of 1.6381, or downwards towards the mid-January low of 1.5545. A break down through 1.5545 would then bring the May 2010 low of 1.4831 firmly into view.
- Pound to Canadian Dollar Exchange Rate Forecast – The GBP CAD exchange rate showed signs of a revival over the past seven days
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