Pound to Canadian Dollar (GBP/CAD) Exchange Rate Likely to Fluctuate, Awaiting Data

July 7, 2014 - Written by Tim Boyer

STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Likely to Fluctuate, Awaiting Data

The Pound to Canadian Dollar exchange rate is currently trading in the region of 1.8223 GBP/CAD following weeks of consistently positive UK data; versus high commodity prices and inflation levels from Canada.

The Canadian Dollar has been growing stronger against the US Dollar, currently trading above the 94 cents mark at 0.9405.

With high commodity prices encouraging a ‘Loonie’ boost against a weakened ‘Greenback’, concern has grown amongst economists on the sustainability of the strong ‘Loonie’ in the Canadian economy. Fear that the ‘Loonie’ being too strong will damage exporters and tourism; economists are speculating that the Bank of Canada may have to step in to decrease its worth.

The latest CAD forex levels are:

- The Pound to Canadian Dollar exchange rate is 0.05 per cent lower at 1.82653.
- The Euro to Canadian Dollar exchange rate is trading up 0.22 per cent at 1.4507.
- The Canadian Dollar to Euro exchange rate is 0.22 per cent lower at 0.68929.
- The Canadian Dollar to US Dollar (CAD/USD) exchange rate is 0.1 pct lower at 0.93778.

Royal Bank of Canada representative Gregg Moore stated: ‘We’re expecting a pullback at this point. In order for exports to truly pick up, and that being the key area that’s expected to drive the economy in the coming years, it does mean the ‘Loonie’ should have to depreciate before we see some more sustainable growth.’

In contrast, other countries have attempted to keep their currencies low such as the recent statement from Glenn Stevens for the Reserve Bank of Australia, stating that the ‘Aussie’ was seriously overvalued and the RBA expected it to drop.

Economist Doug Porter commented: ‘The governor of the Reserve Bank of Australia effectively just said that he thought the Australian Dollar was ridiculously high—they’re not shy at all.’

Pound Sterling Trades High vs the US Dollar

Alternatively the Pound Sterling (GBP) has also been trading high against the US Dollar (USD), fuelling speculation of interest rate rises in the UK. However Monday has seen a softening of Sterling against the ‘Greenback’ as the positive US employment data from last week continues to prevail in the currency market.

With speculation of a rally for the US Dollar, the Pound is dependent on positive UK data this week to enable it to gain further. Thursday will announce the Bank of England’s Interest Rate Decision, which although likely to remain at 0.50% could be influential regarding the timeframe of interest rate hikes. Conversely Canada will be waiting until the following week on the 16th to discuss interest rate rises which could prove very influential for the ‘Loonie’.

Canada’s most influential day will be Friday as the Unemployment Rate and Net Change in Employment statistics are published. The Unemployment Rate is currently predicted to remain at 7.0% whilst the Net Change in Employment is forecast to create 24.0K jobs, less than May’s 25.8K.

Currency expert for Scotiabank, Camilla Sutton, has suggested that the 94 cent ‘Loonie’ isn’t sustainable, claiming 92 cents is more reasonable.

Sutton stated: ‘This trend is quite strong, so we could see it move higher for another week or two. We don’t hear from the Bank of Canada until July 16 and when we do, we are likely to hear governor Poloz remind us repeatedly that the strength in the Canadian Dollar is likely to weigh on the economic outlook. He’s likely to be particularly concerned because we did start to see some improvement in the export numbers.’
The Canadian Dollar is also proving popular amongst investors for its better-than-forecast inflation figures which have spurred speculations of an interest rate hike happening in Canada in the near future.

The heightened Canadian Dollar however is directly in contrast to the central bank’s plans for the Canadian economy. In April the Bank of Canada stated: ‘We continue to believe that rising global demand for Canadian goods and services, combined with the assumed high level of oil prices, will stimulate business investment in Canada and shift the economy to a more sustainable growth track. The lower Canadian Dollar should provide additional support.’

GBP/CAD Exchange Forecast - Volatility on BoC Interest Rate Decision

With influential data released for the UK this week, including interest rate decisions, the Pound is likely to fluctuate. Moreover the Pound and Canadian Dollar currency pair will be subject to change over the next few weeks as Canadian economic developments unfold and the interest rate decision from the Bank of Canada becomes prominent.

Until then, both currencies appear to be strong against the US Dollar, although with a rally in sight for the ‘Buck’ both currencies may soften.

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TAGS: Pound Canadian Dollar Forecasts