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Pound Sterling to Canadian Dollar Exchange Rate Forecast: GBP/CAD Holding Steady, GBP/USD at 5-Year Low

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Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Holding Steady

The Pound Sterling to Canadian Dollar (GBP/CAD) was trading in the region of 1.8045 on Wednesday as markets prepared to shut up shop for the Christmas break.

The Canadian Dollar fluctuated against the majority of its currency counterparts on Tuesday as a result of Canadian and US growth figures.

After it was revealed that the pace of expansion in the US was at its strongest for five years in the third quarter, the Canadian Dollar to US Dollar (CAD/USD) exchange rate fell to a five year low of 1.1667 Canadian Dollars.

The ‘Loonie’ failed to derive much benefit from the news that Canada’s economy expanded by 0.3% on the month in October, better than the 0.1% expansion anticipated.

Economist Derek Holt stated that the division in growth between the US and Canada is ‘widening to Canada’s disadvantage and I can’t see that changing over our 2015-16 forecast horizon that favours the US as the oil price shock carries negative effects on Canada.’

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is unlikely to experience any movement in the hours ahead as data is in short supply. The pairing will probably continue trading in its present range until after the Christmas holidays.

GBP/CAD Exchange Rate Sheds 0.6%

The Pound Sterling to Canadian Dollar (GBP/CAD) weakened slightly on Tuesday as investors bet that the UK’s final third quarter growth report would show a negative revision.

As the annual figure was indeed negatively revised from 3.0% to 2.6%, the GBP/CAD exchange rate eased lower.

The GBP/CAD exchange rate went on to drop by over 0.6% during the North American session as Canada’s growth figures for October exceeded expectations. The monthly number of 0.3% smashed estimates for expansion of 0.1% while the annual figure of 2.3% was better than the 2.1% year-on-year growth anticipated.

The Pound Sterling to Canadian Dollar exchange rate hit a low of 1.8007.

Earlier…

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending around the day’s opening levels on Monday amid a dearth of economic reports for either the UK or Canada. Today’s US data could have a modest impact on the ‘Loonie’, but movement is likely to be limited in the run up to Christmas.

Earlier…

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate experienced fluctuations this week after several important developments took place, including the Bank of England (BoE) meeting minutes and Bank of Canada (BOC) Consumer Price Index (CPI).

The Bank of Canada’s CPI figures fell from 2.3% to 2.1%, despite forecasts to climb from 2.3% to 2.4%. The main reason accredited to lower inflation came from the recent tumble in the price of crude oil.

The Bank of Canada holds its inflation rate target at between 1-3%.

Economist Doug Porter commented on how Canadian inflation remains 0.7 percentage points above the US inflationary level, stating: ‘That’s not a bad thing when much of the industrialised world is grappling with inflation that’s too low for comfort. In some ways, Canada is facing almost an ideal inflation backdrop—not too hot, not too cold.’

In the past, the Bank of Canada has stated that the rising inflationary levels were temporary to stave off speculation that the central bank was coming near to hiking interest rates.

Porter continued: ‘The pullback in both headline and core prices provides some headline and core prices provides some heavy-duty support to the Bank of Canada’s view that much of the prior run-up in (the Consumer Price Index) was “transitory”. The Bank of Canada now seems to be sitting pretty with both headline and core inflation almost bang-on the 2% target.’

As well as fluctuating against the Pound, the Canadian Dollar languished at a five-year low against the US Dollar following the publication of the Canadian CPI.

Currency strategist Shaun Osborne said of the result; ‘With policy in Canada likely to stay on hold, we can contrast that with the push to rate normalization in the US. There will be more narrowing of interest-rate differentials in the US Dollar’s favor, which will be negative for the Canadian Dollar.’

Meanwhile, the Pound exchange rate was supported by the impressive UK retail sales figures published earlier in the week.

Sales were shown to have increased by 1.7% on the month rather than the 0.3% expected, although retail prices fell on the month amid the supermarket price war.

As stated by British Chambers of Commerce (BCC) economist David Kern; ‘The decline in store prices reflects fierce competition in the retail sector and provides further evidence that inflation will fall below 1% in the coming months.’

Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast

However, in the week ahead, domestic data is running thin on the ground with markets closed over the Christmas period.

Tuesday will see the release of UK BBA Loans for House Purchase and final Gross Domestic Product (GDP) figures. Canadian GDP will also be out which resided at 2.3% on the year in September.

The last batch of growth data prompted this response from one industry expert; ‘The good news is that the economy was in a surprisingly very good place heading into the energy price storm.’

However, Tuesday domestic data for both nations will be residing on the thin side. If the price of oil makes any major movement, the ‘Loonie’ exchange rate could feel the effects.

In recent weeks the value of Canada’s largest commodity, oil, has taken a dramatic tumble. However, expert in the field Sir Ian Wood has recently rebuffed claims that the industry could collapse completely; however, Wood did concede that jobs would in fact be lost.

 

Wood stated that speculation that the industry could collapse were ‘well over the top and far too dramatic.’

 

However, Russia is struggling to cope with the recent decline in prices causing another fear that a global slowdown could be approaching. However, Russian President Vladimir Putin suggested that the Russian economy will rebound within two years.

 

Putin stated: ‘If the price level remains low, companies will stop investing in hard-to-recover reserves and new fields. Given a backdrop of growth in the world economy, it will eventually jump and this will be bad even for developed countries.’

Can Oil Bounce Back and Support the Canadian Dollar Exchange Rate?

Some economists are forecasting a snap-back in oil prices by mid 2015, bad news for UK consumers who are enjoying a dip in fuel prices. Recently, the Bank of England announced that inflation could dip below 1.0%, and while it hasn’t yet sunk below, it has reached 1.0%.

Recent Retail Sales figures saw a surge in consumer spending as lower oil prices offered UK citizens more expendable income.