Canadian Dollar (GBP/CAD) Exchange Rate Losses Forecast Following Weak GDP Data

June 30, 2014 - Written by John Cameron

STORY LINK Canadian Dollar (GBP/CAD) Exchange Rate Losses Forecast Following Weak GDP Data

The Canadian Dollar (CAD) exchange rate forecast could see a decline against the British Pound (GBP) following weak GDP data - A slew of data from the eurozone has affected the relative value of the euro (currency:EUR) during Monday's session.

The key release came at 1000hrs this morning, with the latest Consumer Price Index inflation numbers from the single currency area. The print showed exactly as per analysts’ expectations, pointing to a year-on-year increase in prices of 0.5% for the region. The June number came out exactly as per May’s result and marked the ninth month on the trot where prices increased at a below-target level.

The inflation result will come as a disappointment to the European Central Bank (ECB), which introduced a raft of policy-loosening measures four weeks ago.

The unprecedented cutting of all three of the ECB’s key lending rates, with the overnight deposit rate being trimmed to below the zero percent level, meaning that financial institutions are now charged for holding funds with the ECB, appear to have had little effect in inflating prices in mainland Europe up to this point.

With the ECB meeting later this week in order to decide on its next step in fighting deflation, further headline-grabbing comments and suggestions of future actions would appear likely.

Many analysts views last month’s ECB meeting as the first step on the road to a eurozone version of Quantitative Easing. If Thursday’s press conference from ECB President Mario Draghi contains further detail on this, then expect the Pound euro exchange rate to once again make a run at its 20-month high of close to 1.2600.

However, not all economists are sure that the ECB’s dramatic policy action of earlier this month, part of which makes cheap cash available to European banks via a Targeted Long Term Refinancing Operations – will have the desired effect.

Nick Matthews of leading investment bank Nomura stated earlier that this programme, ‘can be interpreted to suggest the ECB could be open to increasing the refinancing rate sometime in 2017, when the actual message and focus should be on the fact that rates will stay low for an extended period’.

The effect of this mixed message on the future timing of interest rate increases on the euro could see the single currency unexpectedly firm in the short-to-medium term.

Elsewhere, this afternoon’s Canadian Gross Domestic Product data fell short of the anticipated level, printing at an annualised 2.1% versus an expected 2.3%.

GBP/CAD Dollar Forecast

The April print hurt the Canadian Dollar on the day, sending the Pound Sterling Canadian Dollar exchange rate up to as high as 1.8262 GBP/CAD earlier. Analysts forecast that the negative effect of the growth figures could hold back the Canadian unit for weeks to come.

Today's Canadian Dollar Exchange Rates, as of 02/07/2014

The Pound Sterling to Canadian Dollar exchange rate is trading up +0.08% at 1.82525 GBP/CAD.
The Euro to Canadian Dollar exchange rate is trading down -0.17% at 1.45267 EUR/CAD.
The US Dollar to Canadian Dollar exchange rate is trading down -0.03% at 1.06331 USD/CAD.

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