The Pound powered to its highest level against the Canadian Dollar for eight weeks

By on October 2nd, 2012.
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The Pound powered to its highest level against the Canadian Dollar for eight weeks.

Foreign Currency Market Update – GBP / CAD Update

The Pound powered to its highest level against the Canadian Dollar for eight weeks during last week’s session, peaking at 1.5990 on Thursday. The move out of CAD-denominated assets during the first half of last week was symptomatic of a generalised shift out of risk by institutional investors due to concerns that stringent austerity measures in the eurozone are beginning to threaten the social fabric of the region. Bloody scenes on the streets of Athens and Madrid, as anti-austerity protests dissolved into violence, helped to stoke these fears and served to send the rates of interest which Spain’s government was paying on its benchmark 10-year government bonds soaring to above 6% on Wednesday.

The Canadian Dollar has come under further selling pressure during the past seven days thanks to the continued drop-off in world commodities prices. Investors are concerned that the apparent slowdown in the giant Asian economy will downwardly affect demand for crude oil, Canada’s key export. This has caused the price of a barrel of crude to dip by over $10 in the past two weeks alone.

Last Friday’s session saw the Canadian Dollar firm a little to trade back down into the mid-1.5800s against Sterling. The move lower for GBP CAD came in spite of a marginally weaker-than-anticipated Canadian GDP reading for July, which revealed that activity in Canada’s economy continues to cool.

The Canadian Dollar has strengthened further against the Pound as this week’s session gets underway, thanks to yesterday afternoon’s encouraging US ISM Manufacturing survey for last month, which took the GBP CAD exchange rate down to 1.5829. The market’s knee-jerk reaction to last Thursday’s visit to 1.5990 was to send the pair instantly lower, suggesting that GBP CAD was overbought at levels close to 1.6000. If the Pound continues to lose ground against the ‘Loonie’ this week, then GBP CAD’s 5-week low of 1.5565 will quickly become a near-term target. An announcement of more QE from the Bank of England on Thursday, or better-than-anticipated Canadian labour market data on Friday, could precipitate such a scenario.

Heads Up

Summary of major upcoming data releases that we think may move the market.

Related posts:

  1. The Canadian Dollar shot up to its highest level against the Pound since Christmas week
  2. Pound to Canadian Dollar Forecast: The Sterling Canadian Dollar exchange rate held below the 1.5900 level for virtually the whole of July
  3. The Pound rallied towards the highest level in three weeks against the US Dollar
  4. The Pound rallied to the highest level in two-weeks against the Euro
  5. The Pound rallied to the highest level in two-weeks

Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/VT36zh40xAM/

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