Canadian Dollar Exchange Rate - Pound to CAD Firmer but Remains Under Pressure

July 28, 2014 - Written by Tim Boyer

STORY LINK Canadian Dollar Exchange Rate - Pound to CAD Firmer but Remains Under Pressure

The Pound to Canadian Dollar exchange rate (GBP/CAD) was trading firmer oas the wek started but was under pressure as hedge funds and speculators reduced their bets for more Sterling rises. Bets for further increases in the currency’s value dropped to the lowest level seen since March.

Over the weekend sentiment towards the Pound Sterling (GBP) was softened after a report showed that profit warnings made by UK companies increased to the highest level since 2012 in the first half of the year. The rise comes as the Pound’s rally weighed upon earnings and impacted upon the nation’s exporters. So far this year the British Pound has soared by 11% against most of its major peers.

As of Tuesday, the Pound Sterling to Canadian Dollar exchange rate is positioned at 1.83425 GBP/CAD.

Speculator bets on further advances for Sterling exceeded those expecting a decline by some 27,497 contracts last week, a fall from the 38,770 forecast in the previous week. Compared to the 56,412 in the week through July 4th the latest figure was a sharp fall.

“A lot of good news is baked in the cake as far as Sterling is concerned. For the time being at least it looks as if in a lot of those long positions in Sterling there may be a rush for the exit,” said an economist from National Australia Bank in a TV interview with Bloomberg.

Against the US Dollar the Pound exchange rate was trading close to a one-month low as Friday’s upbeat durable goods data out of the USA supported the ‘Greenback’. The US currency was also higher against the Canadian Dollar (CAD) and was finding support from safe haven demand as the markets remained jittery over the situations in Ukraine, Gaza, Iraq and Libya.

The Canadian Dollar (CAD) is forecast to fall further over the coming weeks as sentiment towards the Canadian economy eases and the USA continues to show signs of improvement. Over the course of July the ‘Loonie’ has lost 1.3% due to a diverging market which leaves the currency vulnerable if speculators cut their long positions.

“CAD sentiment has diverged from spot in July as a build in the net long contrasts with a 1.3% decline in the currency, leaving CAD vulnerable to a turn,” said currency strategists Camilla Sutton and Eric Theorat from Bank of Nova Scotia.

The ‘Loonie’ is likely to see further volatility later in the week as the USA releases a number of key data reports. The major releases come on Wednesday with the latest US GDP figures and the Federal Reserve’s interest rate decision. Signs that the central bank could raise interest rates sooner than expected are likely to strengthen the ‘Greenback’ at the expense of the ‘Loonie’.

Back to Monday and the session is likely to see muted trading due to the lack of major data releases and geopolitical concerns.

“It is the last Monday of July and global financial markets are having a mixed – truly mixed session, Geopolitical tensions in the Middle East (the ceasefire in Gaza looks to be over) and more sanctions against Russia (Japan is the latest to add to the list) are largely responsible for the inability of markets to head in one direction as there was no new economic news,” said senior economist Jennifer Lee of BMO Nesbitt Burns

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