The Pound Canadian Dollar exchange rate recovered on Wednesday due to poor risk-sentiment and surged on Thursday as the latest UK data impressed investors.
This week GBP CAD has fluctuated between 1.7535 and 1.7787.
Sterling investors became more optimistic on Thursday as the day’s data contained no particularly disappointing small-print, unlike the week’s earlier positive figures.
Britain’s retail sales results came in well above expectations in April. The monthly figure jumped from -1.4% to 2.3%, beating the forecast 1%. The year-on-year result was even more impressive, doubling from 2% to 4% and eclipsing the expected 2.1% result.
The strong improvement in retail sales was due to Easter increasing consumer spending over March.
Analysts had expected Easter to boost retail sales considerably, and these results still beat expectations by far. This was in part thought to be due to the warmer weather in April making consumers more eager to shop.
More importantly, better-than-expected retail sales means consumers are feeling confident despite rising inflation and slowing wage growth.
This has added to hopes that Britain’s economy will remain resilient and has bolstered hopes of tighter monetary policy from the Bank of England (BoE).
It has also made traders more optimistic about this week’s previous data. With consumer activity concerns delayed somewhat, investors are now more excited about Wednesday’s news that Britain’s unemployment rate had fallen to 4.6% – its lowest level since 1975.
Meanwhile, the Canadian Dollar demand from earlier in the week has eased considerably as oil concerns rise once again.
Despite news that Saudi Arabian and Russian oil producers were planning to support an additional nine months of oil production cuts, prices of the commodity slipped again on Wednesday and Thursday amid persistently strong oil stocks.
Many OPEC and non-OPEC oil producers have been cutting oil production since earlier in the year on hopes it will limit oversupply and increase demand for the commodity.
Thus far it doesn’t seem to have had a notable effect on long-term oil prices, which has meant any recent market excitement about oil has been limited.
Risk-sentiment has also been poor this week due to concerns about the Donald Trump Presidency.
As a special investigator, Robert Mueller, is assigned to oversee an FBI Trump-Russia inquiry, markets are becoming increasingly anxious that Trump’s scandals will limit his ability to pass through tax and infrastructure reforms.
This week’s key UK data has come and gone, meaning Pound exchange rates may not be drastically altered until next Thursday’s UK Gross Domestic Product (GDP) stats are published.
The Canadian Dollar outlook is likely to be altered by key Canadian data due for publication on Friday. March retail sales and April Consumer Price Index (CPI) stats will be published.
If Canadian inflation beats expectations this is likely to increase market hopes that the Bank of Canada (BOC) could take a more hawkish tone in the foreseeable future.
At the time of writing this article, the Pound Canadian Dollar exchange rate trended in the region of 1.7810. The Canadian Dollar to Pound exchange rate traded at around 0.5610.