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Canadian Dollar Exchange Rate Update: Pound to CAD Dollar Firmer Following Data Releases Today

May 21, 2014 - Written by Minesh Chaudhari

The Pound edged higher against the Canadian Dollar yesterday and remains trading firmly after domestic Canadian data disappointed economists.

Sterling was buoyed yesterday by data which showed that the UK’s inflation rate increased more than forecast. According to the Office for National Statistics inflation increased by 1.8% year-on-year in April, beating economist forecasts for a figure of 1.7%.

The data increased speculation that the Bank of England will raise interest rates sooner than forecast as the inflation rate drew nearer to the Bank’s target of 2%.

Unemployment has already fallen below the Bank’s initial target of 7% and with signs that other parts of the economy are improving pressure is growing on the BoE to take action.

The Canadian Dollar meanwhile took a hit from reduced for higher yielding riskier assets as investor concerns over the tensions in Ukraine, Libya, Thailand and Vietnam all weighed upon sentiment.

Local domestic data also knocked the Canadian currency lower.

According to Statistics Canada wholesale trade unexpectedly declined by 0.4% in March. The fall was being blamed on falling demand for cars.

Economists had forecast that sales would rise by 0.4% and add to the 1.1% advance recorded in February.

Sales in the machinery, equipment and supplies subsector slipped by 1.4% marking the third successive drop in four-months, while the personal and household goods sector fell by 1.5%.

Inventories recorded a third successive gain, rising 2.3% to $64.1 billion, the highest-level on record. The previous high was the $62.7 billion seen in February 2014.

The next major piece of data for Canada comes on Friday when the markets will look at the latest inflation data and try to determine what impact the reading will have on the Bank of Canada’s interest rate announcement due in June.

The Pound is expected to push further against the ‘loonie’ throughout today’s session if UK retail sales data comes in as strongly as forecast.
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