If the move higher for GBP CAD continues, then a revisit of last month’s 7-month high of 1.6206 looks possible.
Foreign Currency Market Update – GBP / CAD Update
The Pound has started this week’s session in the currency markets on the front foot against the Canadian Dollar, as market participants shifted out of CAD-denominated assets thanks to concerns that a raft of Canadian data releases this week will point to a weakening of the country’s economy. The move has seen GBP CAD make pronounced gains from Friday’s close at 1.5911 to trade close to 1.6100 by the middle part of today’s European session. Investors are particularly worried about Friday’s CPI inflation data – recent Canadian data releases have pointed to a cooling in activity in the country’s economy. If Friday’s data shows a downward move in the rate of domestic price rises, then talk of a near-term interest rate cut by the Bank of Canada is likely to evaporate and commentators may instead start to talk up a rate cut. Such a sea-change in rate expectations would hit the Canadian Dollar hard.
Meanwhile, the situation in the eurozone continues to inform price action on GBP CAD. Relief that the people of Greece appear to have voted for a pro-bailout government at yesterday’s general election caused the Canadian Dollar to gain support at the start of last night’s Asian session. However, this optimism did not take long to dissipate; as today’s European session got underway, the interest rate which Spain’s government is paying on its benchmark 10-year yields spiralled to 7.14% – its highest level since the euro was instigated in 1999. Fears that the eurozone’s debt crisis will escalate, plunging the region into an economic winter, have hit the Canadian Dollar, due to Canada’s heavy dependence on continuing demand for its oil from key export markets. In the short-term, the downward move in the price of a barrel of crude oil which the news from Spain has precipitated is likely to suppress the CAD.
If the move higher for GBP CAD continues, then a revisit of last month’s 7-month high of 1.6206 looks possible. However, caution is advisable for clients needing to buy Canadian Dollars in the near-term, as the minutes of the latest Bank of England monetary policy committee meeting, penned in for release on Wednesday morning, could reveal that the nine-man committee held discussions regarding further QE. Such a revelation would trigger pronounced selling pressure on the Pound.
Summary of major upcoming data releases that we think may move the market.
- The Canadian Dollar has started this week’s session firmly under the cosh
- The Canadian Dollar struggled to re-assert itself in the currency markets
- Pound Sterling to Canadian Dollar Foreign Currency Exchange Rate Forecast – The Canadian dollar had a good week
- The Canadian Dollar put in a tame performance in the currency markets
- The Pound tested lower against the Canadian Dollar during last week’s session