Record Low UK Deficit Triggers GBP CAD Advance

April 25, 2017 - Written by Ben Hughes

STORY LINK Record Low UK Deficit Triggers GBP CAD Advance

Sterling’s rise against the Canadian Dollar today has partly come from UK borrowing data, which has shown the annual deficit fall to the lowest since the 2007-08 financial crisis.

Monthly data has been less positive, with March’s deficit hitting -5.1bn instead of the forecast -3bn.

Canadian economic anxiety has also aided the GBP CAD rise, with falling Canadian sales lowering trader confidence in the ‘Loonie’.

Another limiter on the Canadian Dollar has been the future of Canadian-US trade. Since Donald Trump’s abrupt u-turn on the North American Free Trade Agreement (NAFTA), economists have raised concerns about Trump potentially ‘tearing up’ the deal.

Finally, crude oil prices have dropped to under $49.50 per barrel today, which has cemented the Canadian Dollar’s status as the weaker of the two currencies.

Asides from any surprise general election developments, the Pound is next set to move on Thursday’s house price and Confederation of British Industry (CBI) trades data.

Home prices may cause little overall movement, given that a forecast monthly drop in April could be countered by a predicted annual rise.

That leaves the CBI stats – reported retail sales are forecast to slow in April, while total reported sales activity is also due to dip.

If this data doesn’t weaken the Pound to Canadian Dollar exchange rate, the pairing may yet be damaged by a surprise slowdown in Q1 GDP growth on Friday.

The negative impact of rising inflation and falling wage growth may make itself felt in the GDP figure, as forecast by Deloitte Head of Consumer Research Ben Perkins;

‘With less disposable income...consumers are already showing signs of moving away from making major purchases, and this is a trend that is likely to continue’.

The week’s main Canadian data releases will cover retail sales figures on Wednesday and GDP on Friday.

Advantageously for Pound traders, monthly Canadian sales are forecast to contract, which may weaken the Canadian Dollar.

February’s GDP data may also disappoint on Friday, as no growth is expected with a flat 0%.

The Canadian Dollar may have a second chance to recover if crude oil prices rally, but this would require a major drop in US oil stocks on Wednesday.

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TAGS: Pound Canadian Dollar Forecasts