Pound weaker against Canadian Dollar and other peers as investors pare their bets

July 14, 2014 - Written by Tim Boyer

STORY LINK Pound weaker against Canadian Dollar and other peers as investors pare their bets

The Pound Sterling (GBP) weakened against the Canadian Dollar (CAD) exchange rate on Monday after investors scaled back their bets on the UK currency and embarked on a bout of profit taking ahead of this week’s data releases.

Early in the session the ‘Loonie’ declined as oil prices fell as concerns over a possible disruption of supplies out of the Middle East fell. A deal was reached in Libya between the embattled government and rebel forces who had forced the closure of major oil terminals for a year. The opening of the terminals will likely see an extra 500,000 barrels a day of crude oil being put back onto the global energy market.

The Canadian dollar fell to nearly a 3-week low of 1.0746 against the US dollar (USD), 2-week low of 1.4651 against the euro (EUR) and nearly a 2-week low of 1.0100 against the Australian dollar (AUD), from early highs of 1.0726, 1.4590 and 1.0059, respectively.

The Cdn Dollar meanwhile made gains against a number of other peers as traders turned their focus to the release of Bank of Canada’s latest interest rate decision on Wednesday.

The CAD weakened sharply last week after data released on Friday showed that the unemployment rate increased unexpectedly in June.

The data published by Statistics Canada showed that 9,400 jobs were lost last month, a figure which was far worse than the expected increase of 20,000.

As a result the overall jobless rate increased from 7.0% to 7.1%. Economists had been forecasting for an unchanged figure.

Following the data releases the Canadian Dollar dropped by ¾ of a US cent on Friday.

As a result of the data economists raised their forecasts that the Bank of Canada will choose to leave interest rates unchanged at 1% at Wednesday’s policy meeting. It is also expected to stick to its dovish on monetary policy.

‘We will also be looking for any comments about the recent strengthening of the Canadian Dollar and the risks that it may pose for their assumption of strengthening exports. While much of the impact of the semi-annual address has waned with the Fed now providing quarterly forecast updates, we would expect some questions on the timing of future rate increases. Also on Wednesday, the Fed’s latest regional economic survey will be released and should, on the basis of recent job figures, be a relatively upbeat compendium of economic conditions,’ said Mark Chandler, Head of Canadian FIC Strategy at RBC Dominion Securities.

It is widely expected that the central bank’s key rate will remain at one per cent, allowing traders to focus more particularly on the bank’s assessment of how the economy is performing amid rising inflation.

The Pound Sterling meanwhile softened across the board on Monday afternoon as investors pared their bets for further rises of the currency and embarked on a round of profit taking. According to data from the US Commodity Futures Trading Commission the number of bullish bets being placed upon the Pound to rise further declined from its highest level since 2007.

Major data releases for the Pound this week-

Tuesday July 15 – GB PPI Output
GB Retail Price Index
GB Inflation rate

Wednesday July 16 – GB Unemployment rate
GB Claimant count

Major data releases for the Canadian Dollar this week

Tuesday July 15 – CAD Existing Home sales

Wednesday July 16 – CAD Bank of Canada Rate Decision

Friday July 18 - CAD Consumer Price Index

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