CAD Dollar - Exchange Rate Weakens Against British Pound Sterling as Oil Price Drops

June 30, 2014 - Written by James Fuller

STORY LINK CAD Dollar - Exchange Rate Weakens Against British Pound Sterling as Oil Price Drops

Early in Monday’s session the Canadian Dollar (CAD) exchange rate softened against the Pound Sterling (GBP) and other global currencies after the price of oil dropped as the heavy fighting in Iraq was not deemed to have impacted upon supplies of the commodity.

In a day of increase risk aversion most attention was fixed upon Iraq where ISIL declared the territory that it has seized will become a caliphate and the group’s leader proclaimed as caliph.

The announcement came as Iraqi government forces launched a counter offensive against the Jihadists in the northern city of Tikrit.

Iraq's parliament will convene on Tuesday to move forward with the constitutional processes of government formation. Under the Iraqi constitution, parliament must choose a president and prime minister within six weeks of meeting. Russia has provided the Iraqi forces with the first of 25 fighter jets to assist in the fight.

Other events which caused risk aversion was the launch of short ranged missiles by North Korea and renewed worries over the situation in Ukraine.

The ‘Loonie’ then came under further pressure after a report released in the afternoon showed that the Canadian economy expanded less than expected in April. According to Statistics Canada, GDP edged upwards by just 0.1%, the same amount as that seen in the previous month and was below economist expectations for a rise of 0.2%.

As a result of the data the ‘Loonie’ weakened from the strongest level since January against a number of peers.

As a result of the data economists are expecting that the Bank of Canada will now leave interest rates for a longer period of time.

“The outlook for the Canadian Dollar clearly takes a knock. Interest rates in Canada are going to be lower for longer,” said Jane Foley, a senior currency strategist at Rabobank International.

Year on year the Canadian economy expanded by 2.1%, the same figure seen in the previous month. Economists have been expecting second-quarter annualized growth to reach about 2.4%, following a 1.2% advance between January and March. However, with disappointing quarterly output in the United States which Canada depends on for most of its trade activity growth in this country could also ease.

The data showed that quarrying, oil, mining and gas production fell by 0.6% in April marking the first fall in four months. The fall was said to be in part as a result of a closure of oil refineries for maintenance shutdowns. Construction meanwhile dropped by 0.6% and the output of utility companies dropped by 1% as electricity demand fell.

“The economy has largely run out of excuses. The figure today re-enforces the broader picture that the economy isn’t picking up smartly in the spring as some had hoped,” said Doug Porter, chief economist at BMO Capital Markets in Toronto.

The Pound was able to hold onto gains against the ‘Loonie’ despite the release of data which showed that lenders in the UK approved the lowest number of mortgages since last year as tighter lending rules dampened activity.

According to the Bank of England, mortgage approvals for property purchases dropped to 61,707 in May, down from April’s figure of 62,806. British house prices have risen by around 10 % over the past year, with London prices almost double that figure. The Bank of England has said it is increasingly concerned about rising indebtedness.

The Pound could make further gains if tomorrow’s Markit Manufacturing PMI comes in positively. The Canadians Dollar could also find some support if the latest Chinese Manufacturing data comes in strongly.

GBP/CAD Dollar Update - 01/07/2014

The Pound softened slightly against the Canadian Dollar as the commodity based currency found support from the release of positive data from China.

Further gains were restrained however following yesterdays weaker than forecast Canadian GDP data release. Gross domestic product rose 0.1% in April from the prior month compared to a 0.1% month-to-month gain the previous period.

Ref Canadian Dollar Exchange Rates Today - Updated 02/07/2014

The Pound Sterling to Canadian Dollar exchange rate is trading up +0.12% at 1.82589 GBP/CAD.
The Euro to Canadian Dollar exchange rate is trading down -0.19% at 1.45231 EUR/CAD.
The US Dollar to Canadian Dollar exchange rate is trading down -0.04% at 1.06320 USD/CAD.
The Canadian Dollar to Euro exchange rate is trading up +0.19% at 0.68856 CAD/EUR.
The Canadian Dollar to Pound Sterling exchange rate is trading down -0.11% at 0.54768 CAD/GBP.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Canadian Dollar Forecasts Currency Predictions Daily Curre Forecasts