GBP/CAD Continues to Fluctuates as Tuesday’s London Session Draws to an End
- Pound (GBP) Fails to Rally Against Volatile ‘Loonie’ – BOC forecasts strengthened CAD last week
- British Business Sentiment Hits Three-Year Low– Economic stagnation concerns loom
- Update: Canadian Dollar (CAD) Drops on GDP– Markets uneasy after last week’s news
- Forecast: Manufacturing PMI Ahead – British and Canadian Manufacturing prints due
The Pound to Canadian Dollar exchange rate continued to fluctuate throughout the day, but poor Canadian growth data released in the afternoon heavily muted the ‘Loonie’s chances of gaining despite the Pound dropping against majors.
Confirming analyst fears, Canada’s March Gross Domestic Product (GDP) figures printed below expectations on Tuesday afternoon. The monthly figure worsened from -0.1% to -0.2%, while the yearly score slowed from 1.4% to 1.1%.
However, the Pound’s fortunes were little better. New ‘Brexit’ polls released since the weekend revealed a shift in sentiment towards the ‘Leave’ campaign, causing Pound investors to worry that the future of Britain’s economy could still be uncertain.
(Published 11:02 31/05/16)
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate struggled to gain as strongly as other GBP pairings last week as the Bank of Canada (BOC) was able to ease investor fears following the Alberta wildfire crisis.
GBP/CAD was only up slightly on the week’s opening levels at the time of writing as Canadian Dollar investors anxiously await today’s Canadian growth figures. After hitting a high of 1.9297 the pair slipped and trended narrowly in the region of 1.9080.
Sterling (GBP) Slips as Bullishness Wears Off
The Pound experienced bullish trade against many of the majors last week due to newly released polls which indicated a strengthening lead for the EU referendum’s ‘Remain’ campaign.
As the economic future of Britain (and Sterling) outside of the EU would be largely uncertain, the Pound has seen volatility in response to news that Britain could leave the 28-member bloc. This has been worsened by news that the Pound’s status as a reserve currency in world banks could be lost if Britain were to ‘Brexit’.
On the other hand, Sterling has experienced improved sentiment from polls indicating a ‘Brexit’ is unlikely. However, Canadian news last week prevented GBP/CAD from sustaining bullish gains.
Sterling sentiment has been dulled thus far this week after quiet trade on Britain’s bank holiday Monday and Tuesday’s news that UK business sentiment had hit a three-year-low.
According to This is Money;
The mood among British businesses is more gloomy than at any point in the last three years, a survey suggested today.
Amid signs that the UK economy is stagnating, and amid fears surrounding a Brexit, the number of firms expecting business to improve over the coming year has fallen to its lowest level since 2013, according to the Lloyds Bank Business Barometer.
Its May survey showed said the balance of companies who thought trade would pick up over the next 12 months fell by 11 points to 38 per cent.
British data has been otherwise quiet after the bank holiday weekend, leaving Sterling sentiment dampened.
Canadian Dollar (CAD) Holds Ground on Economic Growth Concerns
The Canadian Dollar was able to remain sturdy against a bullish Pound last week after the Bank of Canada (BOC) reassured markets following a wildfire disaster in Alberta earlier in May.
The wildfire, which started in oil sands and severely hindered oil production, went on to destroy a considerable amount of the Fort McMurray town, including businesses and civilian homes.
The BOC was able to maintain an optimistic outlook however, as it expects growth to become positive later in the year as building and oil production resume in the area.
The central bank left its key interest rate at 0.5% and maintained a wait and see approach rather than motioning towards a cut as some economists expected.
The Canadian Dollar’s rally from this news was limited as it came alongside a warning from policymakers that the wildfires would lead to negative Gross Domestic Product (GDP) in not just May, but Q2 as a whole.
An increase in oil prices may also have helped the oil-correlated Canadian Dollar maintain its levels. Consumer confidence in Alberta was also returning according to a telephone poll taken last week.
However, ‘Loonie’ movement was relatively muted as a new week of trading progressed as investors anticipated Tuesday’s March growth figures.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Is Canadian Growth Struggling?
The biggest factor to GBP/CAD movement for the coming week is likely to be Tuesday afternoon’s Canadian Gross Domestic Product (GDP) report.
The key indication of March growth is set to give investors the best idea of how Canada’s economy was performing leading up to May’s wildfire disaster.
Currently, the figure is expected to remain at -0.1% month-on-month and a slow from 1.5% to 1.4% year-on-year. The annualised figure for Q1 is expected to improve from 0.8% to 2.8%.
With the figures already predicted to be mediocre, a worse-than-expected score would lead investors to believe that May’s scores, and Q2’s overall growth, would be poor enough for the Bank of Canada (BOC) to seriously consider an interest rate cut.
Britain’s economic calendar is comparatively quiet his week, with house data including Nationwide house prices and mortgage approvals releasing on Wednesday morning. UK Manufacturing PMI could extend the Pound’s strength however, if it improved from 49.2 to 49.6 as expected – or better.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate currently trends in the region of 1.9087, while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate trades at around 0.5234.
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