Although the Pound to Canadian Dollar (GBP/CAD) exchange rate jumped on Wednesday in response to the Bank of Canada’s unsurprising interest rate decision and dovish commentary, Sterling went on to shed gains against most of its peers on Thursday.
In the immediate aftermath of the BOC’s rate decision the Canadian Dollar brushed an almost month low against the US Dollar and lost ground against rivals like the Pound and Euro.
The BOC left rates on hold (as expected) and intimated that accommodative policy would be maintained.
BOC Governor Stephen Poloz also stated that the Canadian economy won’t be firing on all cylinders again until the middle of 2016. This forecast was roughly a quarter later than initially predicted.
Industry expert Greg Anderson observed; ‘[Poloz] pushed back when the output gap closes by a quarter, effectively he’s pushed back when the Bank of Canada is going to hike by a quarter. He’s painted a case that should lead to further Canadian Dollar weakness.’
However, as Poloz refrained from explicitly talking down the Canadian Dollar, the currency was able to claw back losses.
The ‘Loonie’ also derived support from the news that the price of crude oil (Canada’s main commodity) increased.
The Pound, meanwhile, broadly softened as Thursday’s European session progressed and investors bet that Scottish independence could undermine the currency.
According to strategists with BNP Paribas SA, the appeal of the Pound could diminish if this year’s referendum on Scottish independence goes in favour of nationalists.
Bloomberg News secured this comment from industry expert Phyllis Papadavid; ‘The market’s attention to the referendum is growing and will continue to grow as we head into September [when the referendum is due to take place]. Our base case is that they don’t vote for independence but the risk in the run up to the vote and the potential uncertainty about the actual vote will boost Sterling volatility’.
Canada’s International Securities Transactions figure, which came in above forecast levels, had little impact on GBP/CAD trading.
With UK news lacking for the rest of the week, any additional volatility in the GBP to CAD exchange rate will take place as a result of Canada’s inflation figures.
The nation’s Consumer Price Index for June will be published on Friday.
Economists have projected that non-seasonally adjusted CPI stagnated on a month-on-month basis with consumer prices being up 2.3% on the year.
However, with the BOC asserting only yesterday that Canada’s recent inflation surge was a temporary phenomenon, there is every chance that a CPI decline could be registered.
We predict that Pound to Canadian Dollar currency news will be generated next week by UK public finance figures, Bank of England meeting minutes, Canadian retail sales data, the UK’s retail sales reports and British growth figures.
UPDATED 10:15 GMT 18 July, 2014
Pound to Canadian Dollar Little Moved
During the European session a lack of economic reports for the UK limited the Pound’s movement.
The Pound to Canadian Dollar (GBP/CAD) exchange rate was trending in a very narrow range during the European session as investors focused on the day’s big news – Canada’s Consumer Price Index.
In other currency news, the US Dollar pared gains against several of its peers as the risk-off sentiment which followed yesterday’s tragic Russia/Ukraine developments dissipated slightly.
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,0.5445,
Canadian Dollar,,US Dollar,0.9311,
Canadian Dollar,,Euro,0.6881,
Canadian Dollar,,Australian Dollar,0.9919,
Canadian Dollar,,New Zealand Dollar,1.0654,
US Dollar,,Canadian Dollar ,1.0737,
Pound Sterling,,Canadian Dollar,1.8363,
Euro,,Canadian Dollar,1.4528,
Australian Dollar,,Canadian Dollar,1.0077,
New Zealand Dollar,,Canadian Dollar,0.9357,
[/table]
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