CANADIAN DOLLAR EXCHANGE RATE FORECAST – CAD/GBP FALLS, CAD/USD AT FIVE YEAR LOW
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Meanwhile, the ‘Loonie’ fell against the Chinese Yuan (CNY) in the first half of Wednesday’s European session. The Canadian Dollar reached session highs of 5.4256 versus the Yuan, whilst also brushing lows of 5.3779. However, the Canadian Dollar is on an upward trajectory to begin recording gains against the Chinese currency.
Wednesday’s data has shown Canadian Existing Home Sales figures fall in September on the month by -1.4% after August’s 1.8% growth. The Canadian Real Estate Association (CREA) President, Beth Crosbie, has stated: ‘Affordably priced single family homes are in short supply in some of Canada’s hottest housing markets, which contributed to the monthly decline in national sales activity in September.’
Crosbie continued: ‘That said, there are other markets with ample supply but sellers there are holding firm on price.’
The Canadian housing market has been heating up in 2014 and has seen prices rise drastically. CREA Chief Economist Gregory Klump commented: ‘Sales activity and prices in the third quarter were up compared to the second quarter, although momentum going into the fourth quarter is showing tentative signs of waning.’
The Bank of Canada (BOC) has maintained interest rates at 1.0% for the last four years. 2014’s upswing in housing demand was expected to see the BOC make adjustments to the bank rate; however, increases in borrowing costs appear to be in the distant future.
Klump continued: ‘The continuation of extraordinarily low mortgage rates has been and will continue to be the key support for home sales activity amid continuing price increases in some of Canada’s most active and expensive urban centres.’
Meanwhile, the Pound has recouped some losses against other currencies as the UK Unemployment Rate fell to 6.0% – its lowest since the onset of the global financial crisis. Although the UK saw a drop in inflation this week, the rapidly tightening labour market may add some pressure to the Bank of England (BoE) to increase interest rates.
In the last two Monetary Policy Committee (MPC) meetings a split vote has occurred—a first since 2011. The meeting minutes due out in the next few weeks will detail the amount of votes in favour of a rate hike. The Pound could rally higher if more policymakers opt for increases.
Economist David Tinsley commented: ‘It has become increasingly clear that there has been a change in the outlook. Both external risks and internal ones have the potential for the UK to experience a more significant slowdown in activity than in the MPC’s central case.’
Wages are the central topic of debate when it comes to interest rate hikes in the UK and is an area which has seen fatigued growth. Wednesday saw UK Average Weekly Earnings rise to 0.7% on the year in the three months through August.
And in Chinese news, the Consumer Price Index (CPI) released early on Wednesday showed a weaker-than-expected statistic. Chinese inflationary levels dipped to near five-year lows as the risk of deflation sets in.
CPI figures moved down to 1.6% in September on the year from 2.0%. In addition, the Producer Price Index contracted further in September on a yearly basis to -1.8% from -1.2%. ANZ Bank economists commented: ‘China’s soft inflation profile heightens the risk of deflation, thus requiring further monetary policy easing.’
The People’s Bank of China (PBOC) cut the 14-day repo rate from 3.5% to 3.4% this week in an attempt to encourage real lending in the Chinese economy. However, some economists believe that more frequent PBOC cuts need to occur in the future to help the economy.
Canadian Dollar to Pound (CAD/GBP) and Chinese Yuan (CAD/CNY) Exchange Rate Forecast
The Canadian Dollar is likely to be bearish against the Pound in the rest of Wednesday’s session after such favourable UK employment data. However, gains could increase against the Chinese Yuan which has softened as investor’s deflation fears set in.
Friday will be an influential day for the Canadian Dollar exchange rate with the release of the Bank of Canada’s Consumer Price Index. Both the UK and China will experience a quieter second half of the week in terms of data, leaving any fluctuations in the Pound and Chinese Yuan exchange rates up to global events.
The CAD to GBP exchange rate has traded in-between the boundaries of 0.5513 and 0.5570.
The Canadian Dollar continued its downward movement against the US Dollar and other peers on Thursday as the currency was caught up in a brought sell-off of anything relating to the crude oil industry.
Prices of the commodity continue to fall as supply exceeds demand. Against the US Dollar, the ‘Loonie’ plunged to a five year low.
Against the Pound the currency softened as comments made by Bank of England policy maker Martin Weale said that interest rates should still be raised as Wednesday’s UK unemployment data increased the likelihood that wages will begin to rise at a faster rate, a key factor of the BoEs decision to raise rates.