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GBP/CAD Exchange Rate Forecast: Canadian House Prices Stagnate, CREA Predicts Lower Property Values in 2015

Canadian Dollar Exchange Rate Forecast

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within a narrow range toward the close of UK trading after Canadian Existing Home Sales failed to grow in November. 

October had seen a 0.7% increase, whereas November stagnated at 0.0%.

Canada Real Estate Association (CREA) who undertake the survey stated: ‘While sales nationally are still expected to peak this year and trend lower throughout 2015, they are not expected to return to weakened levels recorded in the first quarter of 2014.’

Strategist David Tulk commented: ‘While downside risks to the outlook dominate current thinking, the challenge posed by household imbalances will only grow the longer they are left unattended.’

Earlier… The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending lower in the early part of Monday’s European session after the Rightmove House Price Index contracted in December by -3.3% on the month.

The annual ecostat was dragged down from a buoyant 8.5% to 7.0% offering further evidence that the housing market is cooling down.

Rightmove concluded that some house prices dropped by over £30,000 between November and December.

The GBP/CAD exchange rate could be altered by the upcoming Canadian Existing Home Sales figures later in the session.

Last week… The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate had an interesting week as the price of oil continues to fall at five-year lows, causing problems for the ‘Loonie’.

In the week ahead, there are several pieces of data to watch out for which may cause GBP/CAD movement. Monday will see Canadian Existing Home Sales figures released. The data came in at 0.7% in October and prompted this response from Bloomberg; ‘The pace of home buying in Canada’s hottest markets isn’t slowing down, even as policy makers renew warnings that inflated prices pose a risk. The real estate association said today that while the housing market’s strength isn’t evenly distributed, it does extend beyond a few large centers.’

If UK CPI Falls, the GBP/CAD Exchange Rate Could Falter

However, Tuesday’s UK Consumer Price Index (CPI) could really create an interesting trading day for the British currency after the Bank of England (BoE) recently suggested that inflation could dip below 1.0% in the next six months.

Economist James Knightley said this of the UK’s inflation outlook; ‘UK inflation is on a strong disinflationary trend with sub-1% readings looking likely in the new year. After peaking at 5.1% in September 2011, UK consumer price inflation has been on a downward trend, hitting just 1.2% last month.’

The Pound Sterling exchange rate sank on the news as investors hedged their bets for later interest rate rises by the BoE.

BoE Governor Mark Carney stated: ‘Our stimulus is flowing through the economy and that is appropriate because we are going to go through a period now where inflation is low – we think it is probably going to dip below 1%, so I will be writing a letter to the Chancellor to explain why that is the case – and it will take some time before it starts to creep back up towards that 2% target.’

However, although investors priced in a later rate hike, Carney stated this week that interest rates would rise regardless of inflation shortcomings.

Carney said: ‘What that means though, for this economy to have balance and inflation to get back to 2% over the next few years is that… interest rates are going to have to increase.’

Split MPC Vote May Trigger Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Rally

Meanwhile, Wednesday could also see some significant Pound Sterling to Canadian Dollar (GBP/CAD) movement with the release of BoE meeting minutes. If another split vote occurred amongst the Monetary Policy Committee (MPC) the Pound Sterling could rally.

Furthermore, if more than two members of the MPC voted in favour of hikes—a highly unlikely prospect—the British currency could rocket.

The last batch of minutes stated; ‘The most recent data regarding private sector average weekly earnings raised the possibility that this process was already in train. Since monetary policy could be expected to operate only with a lag, it was desirable to anticipate labour market pressures by raising Bank Rate in advance of them. It was possible that the real rate of interest consistent with stable inflation over the medium term was now rising. In the judgement of these members, even after a rise of 25 basis points in Bank Rate, monetary policy would remain extremely supportive and an early rise would facilitate the Committee’s aspiration that any subsequent rises in Bank Rate should only be gradual.’

In addition to the meeting minutes, UK Employment Change, Unemployment Rate, Weekly Earnings, Claimant Count and Jobless Claims Change figures are all out for publication on Wednesday.

UK Retail Sales are out on Thursday ahead of a busy day for GBP/CAD on Friday.

Canadian CPI, Oil Prices Could Impact Canadian Dollar (CAD) Exchange Rate

The Canadian Consumer Price Index will be out as well as UK Public Finances, and Central Government NCR.

The price of oil could also cause problems for the Canadian commodity currency, after the recent oil tumble saw the ‘Loonie’ flop to five-year lows against the US Dollar (CAD/USD).

Some industry experts are envisaging further slumps in the price of oil. Industry expert John Ing stated; ‘You’ve got a bounce with the energy stocks after days of gloomy news, though it’s probably more bargain hunting than anything else. Our view is we’re still heading for further weakness in energy prices.’

In addition any comments from either the Bank of Canada (BOC) or the Bank of England (BoE) could influence the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate.