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GBP/USD, GBP/CAD Exchange Rates Fail to Climb after Wider UK Trade Deficit

US Dollar Currency Forecast

Another oil price rally has helped to shore up the Canadian Dollar (CAD) today, while the US Dollar (USD) recovers ground as markets continue to react to the European Central Bank’s (ECB) latest policy announcement.

Pound Sterling (GBP) Remains on Soft Trend as UK Trade Deficit Disappoints

Investors have not been overly encouraged by the UK’s latest trade figures this morning, as the country’s visible trade deficit was revised downwards in December to -10.4 billion Pounds (GBP) and posted only a narrow improvement to -10.3 billion Pounds in January.

Although this was accompanied by a smaller-than-expected contraction in Construction Output on the year, traders nevertheless took this as a cue to sell out of Sterling. This relatively weak showing does not offer much encouragement for Chancellor of the Exchequer George Osborne’s aim to wipe out the UK’s deficit and could have negative ramifications for next week’s budget speech.

Market Turbulence after ECB Policy Meeting Weakened US Dollar (USD) Exchange Rate

The US Dollar (USD) saw some marked volatility on Thursday as markets scrambled to react to the European Central Bank’s (ECB) unexpectedly comprehensive raft of monetary loosening measures. While the central bank’s decision to expand its quantitative easing program and make cuts to both the fixed rate and deposit rate initially saw the ‘Greenback’ surge on the back of Euro (EUR) weakness, this trend was ultimately short-lived.

Comments from ECB President Mario Draghi that he does not envision interest rates going any lower triggered a sharp rebound in Euro strength which promptly wiped out the gains of the US Dollar. With traders taking a more measured view on Friday morning, however, the Pound Sterling to US Dollar (GBP/USD) exchange rate has fallen back to trend in a narrower range.

Canadian Dollar (CAD) Trends Higher as IEA Suggests Oil Prices have Bottomed Out

Despite a rumoured meeting between members of OPEC and other oil producing nations apparently falling through, the price of oil has broken back above the $40 per barrel mark this morning. In large part this increase in confidence appears to be due to the International Energy Agency’s latest market report, which suggests that crude may well have bottomed out. Increasing its estimates for falls in global oil production the IEA seemed to take a more optimistic view, encouraging investors to do the same.

Hopes are also higher for this afternoon’s Canadian employment data, as traders anticipate an uptick of 10,000 in employment. While this does not stand to cause any change in the country’s Unemployment Rate, any signs of tightening within the domestic job market are likely to shore up the appeal of the Canadian Dollar (CAD) further.

Current GBP, CAD, USD Exchange Rates

At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was slumped around 1.8923, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending narrowly in the region of 1.4294. Meanwhile the Canadian Dollar to US Dollar (CAD/USD) exchange rate was making strong gains at 0.7546.