GBP CAD Exchange Rate Forecast Lower on Schauble Warning

June 9, 2016 - Written by Frank Davies

STORY LINK GBP CAD Exchange Rate Forecast Lower on Schauble Warning

The Pound has dropped heavily against the 'Loonie' today, due in part to comments from German Finance Minister Wolfgang Schauble that the UK would not be able to access the single market if it left the EU.

'Brexit' Developments Continue to Drive Pound Sterling (GBP) Exchange Rate Volatility

Yesterday’s session in the global currency markets saw market-moving data from several leading economies. The Pound Sterling (currency : GBP) started the day off firmly on the front foot as investors continued to put to the back of their minds the early-week opinion polls which suggested that UK voters could come out in favour of a painful ‘Brexit’ on 23rd June.

The latest official domestic Manufacturing Product data helped assuage these fears, revealing that output levels in this key sector increased at 2.3% last month. This represented the fastest pace of expansion in UK manufacturing for almost four years, providing further evidence that the local economy is continuing to strengthen as we move further away from the 2007 – 09 global credit crisis.

Martin Beck of the EY Item Club observed in the aftermath of the highly positive release that, ‘alongside April's strong increase in retail sales, and continued growth in car registrations pointing to a decent performance from the services sector, today's industry numbers suggest that previous fears of a sharp slowdown in the economy in the second quarter may prove overly pessimistic.’

There was further encouraging data from the UK during the afternoon session when the latest rolling three monthly UK Gross Domestic Product estimate from the NIESR pointed to an increase in local economic activity of 0.5% versus last month’s 0.4%.

Falling US Crude Stockpiles Boost Canadian Dollar (CAD) Exchange Rates

Other highlights yesterday afternoon came from North America, with the publication of a broadly disappointing set of Canadian housing sector statistics and the weekly US Oil Inventory numbers.

A drop-off in the monthly Canadian Housing Starts data does not bode well for the nation’s real economy, however the negative effect on the Canadian Dollar (currency : CAD) was more than offset by US data pointing to a larger than anticipated drop off in stocks of Crude Oil.

The news sent the price of a barrel of Brent Crude to fresh near-term highs and provided renewed support for the Loonie.

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