Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls despite Record Decline in Canadian Retail Sales
UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped by around -0.6% this afternoon. This left the pairing trading at around CA$1.6782.
The Canadian Dollar rose against a weaker Pound today despite data showing Canadian retail sales plummeted in April.
April’s sales declined by -26.4%, making this the second record decline as the coronavirus pandemic continued to batter the economy.
Although, the ‘Loonie’ was offered support as markets expect sales to rebound in May.
Statistics Canada showed in a flash estimate, sales are likely to rise by 19.1%. However, BMO Chief Economist Doug Porter noted:
‘It’s a long road back from these April lows.’
Commenting on this afternoon’s data, senior economist at CIBC Capital Markets, Royce Mendes stated:
‘Retailers were devastated by the shutdowns and physical distancing measures employed in April.
‘It wasn’t all bad news in the report though. Retailers who had an online presence were able to capitalize on some of the shifts in buying patterns.’
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Left Muted despite Recovering Oil Demand
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat this morning. This left the pairing trading at around CA$1.6873.
The oil-sensitive ‘Loonie’ struggled to make gains against the Pound today despite oil prices jumping by 1% on Friday.
Friday’s increase in oil prices added to gains in the previous session after OPEC+ agreed to meet promises on cutting supply.
Added to this, oil prices were also buoyed after two major oil traders said demand was recovering.
Oil markets were also supported by plans from Iran and Kazakhstan to make up for overproduction in May.
According to ANZ senior commodity strategist Daniel Hynes:
‘The supply cuts that they’ve [OPEC+] implemented and with other members like Iraq proposing to make up for the lack of adherence to the agreement in May and June does tighten up the market in the shorter term.
‘But it’s not a strong signal of a wholesale shift in the medium term outlook in the market.’
Sterling (GBP) Flat as UK Stuck in ‘Very Unusual Times’
The Pound remained under pressure today, just a day after the Bank of England (BoE) increased its bond-buying programme by £100 billion.
The BoE’s governor, Andrew Bailey stated the country’s economy appeared to be on track to shrink less than previously expected in the first six months of 2020. However, this does not necessarily mean there will be a strong rebound.
Governor Bailey noted:
‘As partial lifting of the measures takes place, we see signs of some activity returning.
‘We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.’
Meanwhile, this morning data showed that Britain’s retail sales rebounded by more than forecast last month.
Sales rallied in May as the country began to ease its coronavirus lockdown restrictions. Sales volumes jumped by a record 12%, following April’s historic slump of -18%.
However, further data revealed Britain’s public borrowing jumped to a record high. Debt passed 100% of economic output which weighed on GBP.
Public sector net borrowing hit £55.2 billion in May. This was a record high after April’s reading was downwardly revised to £48.5 billion.
This was also the first time a measure of public sector debt jumped above 100% of economic output since 1963 when the country was still paying off the costs of WWII.
Pound Canadian Dollar Outlook: Canadian Retail Sales in Focus
Looking ahead, the Canadian Dollar (CAD) could slump against the Pound (GBP) following the release of retail sales data.
If retail sales in Canada plummet further than expected in April due to the coronavirus pandemic, it will send the ‘Loonie’ lower.
Meanwhile, traders’ attention will turn back to Brexit negotiations between the UK and the European Union. EU leaders are expected to assess the state of play in post-Brexit trade talks during today’s EU leaders’ summit.
If leaders in the bloc make pessimistic comments about the state of Brexit negotiations, it will leave the Pound Canadian Dollar (GBP/CAD) exchange rate flat.