The upward excursion to 1.5943, which was the pair’s highest level since the week after Christmas 2011, did not last for long.
Foreign Currency Market Update – GBP / CAD Update
The GBP CAD exchange rate steadily lost ground throughout last week’s session, following Monday morning’s brief spike above the 1.5900 level. However, the upward excursion to 1.5943, which was the pair’s highest level since the week after Christmas 2011, did not last for long, as speculators moved into the markets to take advantage of the whip-saw. This saw GBP CAD rapidly move back down into the 1.57s. The pair has now spent almost the whole of this year trading in a tight range 1.5c either side of 1.5750.
Last week’s session ended with slightly disappointing Canadian GDP Growth data, which showed that annualised growth rate for GBP CAD had tumbled from 4.2% in Q3 all the way down to 1.8% in the last three months of 2011. The figure was in line with market expectations, however it still served to emphasise the slowdown in global activity which has taken place over the last six months.
The GBP CAD rate reversed much of last week’s losses during yesterday’s session, partly as a delayed reaction to Friday’s Canadian GDP data and partly due to comments from Chinese leader, Wen Jaibao, who announced over the weekend that China’s annualised growth target for 2012 was being cut to 7.5%. Although an increase in GDP of this magnitude would represent a minor economic miracle for most Western states, the 7.5% forecast is the lowest for the Asian giant since 2004. This is bad news for the Canadian economy, due to its heavy reliance on the export of raw materials which feed China’s ravenous manufacturing sector.
If crude oil prices continue to ease off their 4-year high of last Friday, which saw the price of a barrel of Brent crude spiral to above $127, then this week could see further downside for the CAD, pushing the GBP CAD exchange rate back up towards the 1.6000 level. Alternatively, another increase in QE by the Bank of England, or an increase in domestic interest rates from the Bank of Canada on Thursday, has the potential to spark a downward move towards the key interim support of 1.5545 for the pair.
Summary of major upcoming data releases that we think may move the market.
- The Pound tested lower against the Canadian Dollar during last week’s session
- Pound Sterling to Canadian Dollar Foreign Currency Exchange Rate Forecast – CAD rallies on gold surge
- Pound Sterling to Canadian Dollar Foreign Currency Exchange Rate Forecast – The Canadian dollar had a good week
- Pound Sterling to Canadian Dollar Foreign Currency Exchange Rate Forecast – Sterling Rebounds from Technical Support
- The Pound weakened 0.3% against the Euro and also lost ground versus the U.S Dollar