Pound to Canadian Dollar Exchange Rate Forecast: GBP/CAD Little Changed after Sales Data
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Yesterday the Canadian Dollar broadly softened in response to dovish comments from the senior Deputy Governor of the Bank of Canada. During Monday’s speech Carolyn Wilkins asserted; ‘It is clear that continued monetary stimulus is needed to return the Canadian economy to sustainable growth and to maintain inflation at target. Depending on the evolution of the data, it is possible that persistent headwinds will mean that some degree of stimulus will be required even after the output gap is closed to keep inflation on target.’
These dovish remarks quashed the expectations for an earlier-than-forecast BOC rate increase raised by last week’s inflation figures and the ‘Loonie’ fell accordingly.
However, with demand for the Pound undermined by the UK’s less-than-impressive Public Finance figures and BBA Loans for Mortgage report, the GBP/CAD exchange rate softened during the European session. The commodity-driven Canadian Dollar was also supported by China’s above forecast Manufacturing PMI.
The drop in mortgage loans supports the argument that the UK’s housing market is slowing, lessening the pressure on the BoE to increase interest rates.
The public finance figures detailed an expansion in the UK’s public sector net borrowing, a result which is likely to be of concern to Chancellor of the Exchequer George Osborne.
In the view of one Berenberg Bank economist; ‘Weak pay growth is creating problems for the government’s budget. The economic recovery is creating plenty of jobs which should help keep a lid on benefit spending, but still weak wage growth means the recovery is not boosting tax receipts as much as had been hoped.’
Sterling drifted lower against the majority of its peers after the data was published.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate hit a high of 1.8105
During the North American session the Pound managed to claw back losses against the Canadian Dollar after Canada’s retail sales figures came in well below predicted levels.
Canadian retail sales were shown to have fallen by -0.1% in July on a month-on-month basis rather than rising by the 0.5% expected. This followed a positively revised sales gain of 1.2% in June.
Sales less autos fell by -0.6% on the month instead of stagnating as anticipated.
The decline was the first for seven months.
According to Statistics Canada; ‘Sales at general merchandise stores decreased 2.7% in July, giving back some of June’s gains. Weaker sales were reported by both store types within the subsector, as other general merchandise stores (-3.6%) and department stores (-1.5%) declined. Sales at food and beverage stores were down 0.8%. Supermarkets and other grocery stores declined 1.1% in July while sales at beer, wine and liquor stores were essentially unchanged from June. Following three consecutive monthly increases, sales at clothing and clothing accessories stores declined 2.3% in July. Lower sales were reported at clothing stores (-2.4%), shoe stores (-3.0%) and jewellery, luggage and leather goods stores (-0.1%).’
A below-forecast Manufacturing PMI print for the US also aided the Pound’s advance as it ever-so-slightly reduced the odds of the Federal Reserve increasing interest rates before the Bank of England.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast
The Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to continue fluctuating within a narrow range in the hours ahead.
Any notable developments in the situation in Syria could impact GBP/CAD trading, as could the comments of various Federal Reserve officials.
Canadian data is lacking for the rest of the week, but Chinese figures, US data and geopolitical tensions may all spark volatility.
The Canadian Dollar is trading against the Pound in the region of 0.5539 and against the US Dollar in the region of 0.9069.
After managing to record a modest gain yesterday following the publication of slightly disappointing Canadian retail sales figures, the Pound to Canadian Dollar exchange rate began Wednesday little changed.
Although the unexpected decline in Canadian retail sales did see investors reconsider their Bank of Canada rate hike expectations, consumer demand in Canada remains strong and the ‘Loonie’ didn’t stay depressed against the Pound for long.
The Canadian Dollar was also trading in a stronger position against the US Dollar as its currency cousin came under pressure as a result of leading statements from Federal Reserve officials.
A decided lack of Canadian reports means that volatility in the Pound to Canadian Dollar exchange rate will most likely be caused by global economic developments.