Outlook For Pound Canadian Dollar Exchange Rate (GBP CAD) Hinges On Canadian CPI Inflation Data

Published: Friday, 22 February 2013 09:00 BST - Written by Ben Hughes

STORY LINK Outlook For Pound Canadian Dollar Exchange Rate (GBP CAD) Hinges On Canadian CPI Inflation Data

The overnight rally for the US Dollar which followed the release of the latest set of Federal Reserve FOMC minutes late on Wednesday was partially reversed during yesterday’s session. The pro-Dollar move, which sent the GBP USD exchange rate down to a new 31-month low at 1.5131 during Asian trading proved to be a whipsaw – by the European equities close yesterday, the pair was trading back up into the mid-15200s once more.

The mini-reversal for ‘Cable’ looks to have been caused in part by technical factors – the pair appeared to be ‘oversold’ at levels in the low-151s and was ripe for a bout of ‘buying back in’ by speculators. However, there was more to yesterday’s upward shift for GBP USD than this; yesterday’s afternoon session saw the release of two US Dollar-negative pieces of data. The number of initial claimants of US unemployment benefit increased by 20,000 according to the most recent weekly figure. This was well ahead of what analysts had been anticipating.

US Consumer Price Index figures, released at the same time as the US employment data, showed that the annualised rate of headline inflation in the States well below the government’s 2% target at 1.6%. This number was down from December’s counterpart figure of 1.7%, suggesting that the tens of billions of Dollars which the Fed is pumping into the financial system on a monthly basis is not having an destabilising effect on domestic prices.
Looking ahead to today’s session, the key risk event from North America comes in the form of January’s CPI inflation data in Canada. A print of above the expected annualised showing of 0.7% could spark renewed market babble regarding a near-term interest rate rise from the Bank of Canada.

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