The Canadian Dollar (CAD) exchange rate strengthened to a 3-week high against the US Dollar (USD) and advanced against the Pound (GBP) as investors increased their bets that the Federal Reserve will deliver a dovish statement at the conclusion of its two day long policy meeting.
Concerns are growing that the US and global economy is slowing down, something that is expected to cause US Federal Reserve policy makers to delay increasing interest rates until the later part of 2015.
Those worries were heightened on Wednesday after data showed that US mortgage applications to buy homes declined to the lowest level since February last week as interest rates on 30-year home loans increased.
The data published by the Mortgage Bankers Association showed that its seasonally adjusted index of loan requests for home purchases, a leading indicator of home sales, fell 5.0% in the week ended Oct. 24 to its lowest level since February. It was 15% lower than the same week a year earlier.
Weaker than forecast data published on Tuesday was also weighing upon sentiment towards the US currency.
The ‘Greenback’ is likely to come under increasing pressure until the Fed policy statement is released at 18:00 pm GMT.
‘The Fed will want to be flexible because low inflation allows central banks not to be in a rush to raise interest rates. That is not something that will hurt the Dollar. But if the Fed lets the market think quantitative easing is possible, that will be
Dollar negative,’ said Roberto Mialich, senior currency strategist at UniCredit Bank AG.
CAD/GBP Exchange Rate Higher on Lending Data
Sterling meanwhile was softened by data, which showed that mortgage approvals in the UK fell more than economist expectations in September. According to the Bank of England (BoE) approvals fell from 64,054 in August to a 14-month low of 61,267. The mortgage data suggests that the UK housing market is cooling and that measures by the BoE to cool the market are starting to work.
The Pound was also weighed upon by data, which showed that business lending fell by £710 million from August to September. Lending to small and medium sized businesses dropped by £157 million, a fall of .2% from the preceding year.
With attention being focused on the US Federal Reserve, meeting data negative data out of Canada has had little impact upon the ‘Loonie’. The currency remains supported along with other commodity based riskier assets as risk sentiment improved.
According to Statistics Canada, the price of raw materials declined by 1.9% last month, a sharper fall than the 1% decline forecast. Year-on-year, Canada’s raw materials prices slipped 0.9% in September, following a 0.6% decline the previous month.
UPDATE
The Canadian Dollar to US Dollar exchange rate is currently trending in the region of 0.8924.
The Canadian Dollar to Pound Sterling exchange rate is currently trending in the region of 0.5582.
In the aftermath of the Federal Reserve rate decision, the Canadian Dollar to US Dollar exchange rate has softened. This is as a result of the Fed opting to end quantitative easing. However, dovish language regarding the timing of a rate hike has caused traders to slow the US Dollar advance.
With sentiment towards the Pound still negative following disappointing domestic data on Wednesday, Thursday’s British data has done little to provoke a Sterling upsurge. With an absence of Canadian data on Thursday the CAD/GBP exchange rate has held steadily since markets opened.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Canadian Dollar,
,Pound Sterling,0.5560 ,
Canadian Dollar,,US Dollar,0.8982 ,
Canadian Dollar,,Euro,0.7037 ,
Canadian Dollar,,Australian Dollar,1.0084,
Canadian Dollar,,New Zealand Dollar,1.1264 ,
US Dollar,,Canadian Dollar,1.1134 ,
Pound Sterling,,Canadian Dollar,1.7986 ,
Euro,,Canadian Dollar,1.4213 ,
Australian Dollar,,Canadian Dollar,0.9917 ,
New Zealand Dollar,,Canadian Dollar,0.8878 ,
[/table]
