Pound Canadian Dollar Exchange Rate Forecast Lower, GBP EUR Higher

Modified: Thursday, 12 June 2014 10:09 BST - Written by Toni Johnson

STORY LINK Pound Canadian Dollar Exchange Rate Forecast Lower, GBP EUR Higher

Today’s session brings a packed schedule of data releases with April’s version of the whole of eurozone Industrial Production figures leading the way at 1000hrs BST.

The euro (currency:EUR) was hit hard during yesterday’s session as institutional investors continued to sell euro-denominated assets and buy higher-yielding tenders including the Australian and New Zealand Dollars (currency:AUD) (currency:NZD). This so-called ‘carry trade’ is likely to be a popular play moving forward as the ECB will not be in a position to consider a tightening of monetary policy until well into 2015.

From a fundamental perspective, this morning’s Industrial Production number would appear to be a potentially hazardous one for the single currency. March’s edition of the data was highly disappointing, revealing a 0.3% month-on-month contraction in activity levels in this key sector of mainland Europe’s economy. The April figure is expected to be far stronger, with a monthly 0.5% showing expected. The eurozone economy remains in a highly depressed state, so this morning’s release is by no means guaranteed to live up to expectations. Analysts forecast that a showing of below 0.5% could send the GBP/EUR exchange rate up towards November 2012’s peak of 1.2562.

Investors’ focus will shift to North America at lunchtime, with April’s Canadian New Housing Price Index giving economists fresh information regarding the state of the Canadian property market. The figure could well have a pronounced effect on the relative level of the Canadian Dollar (currency:CAD) as market participants attempt to second-guess the Bank of Canada on the direction of its next interest rate move. With domestic GDP data significantly beating expectations earlier this month, investor sentiment towards the Canadian economy appears to be on the up. A strong showing from this afternoon’s housing numbers would stoke speculation regarding a BoC rate hike later this year. Analysts forecast that the GBP CAD exchange rate might dip below the 1.8000 threshold for the first time since the first week of February in such an event.

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