Quite Trade sees Pound to Canadian Dollar Exchange Rate Near Opening Levels - Retail Sales Tomorrow

August 20, 2017 - Written by David Woodsmith

STORY LINK Quite Trade sees Pound to Canadian Dollar Exchange Rate Near Opening Levels - Retail Sales Tomorrow

The live Pound to Canadian Dollar exchange rate on Monday August 21 is quoted at 1.62108, a value that has little changed over the course of the day.

With little data released today, all eyes will be on Tuesday's retail sales print.

According to Scotiabank foreign exchange analysts, "CAD is quiet, consolidating in a tight range around Friday’s close at the upper end of its two week range. Near-term domestic risk is limited to second-tier wholesale trade data ahead of Tuesday’s high-level retail sales figures. [...] The near-term balance of risk appears to favor CAD strength as we look to a continued retracement of the late July to mid-August decline."

A significant close for USD/CAD traders last week saw the pair under a key level, indicating further losses ahead according to forecasters.

Scotiabank said "the weekly chart is showing an outside range and Friday’s close will be crucial. A close under the 1.2630 level (last week’s low) clears the way for a full retracement of the USDCAD rally from late July. The 1.2680 level remains important for near-term resistance. We see little support between current levels and 1.2550."

Despite some solid UK labour market data last week, the British Pound tumbled against the Canadian dollar, largely due to rising risk-sentiment and solid commodity news.

Canada’s upcoming economic calendar is quiet so GBP/CAD will react mostly to UK news.

After relatively flat trade early last week, GBP/CAD tumbled and towards the end of Friday’s European session the pair was trending near a low of 1.6205, its worst level since January 2017.

Pound (GBP) Falls against Canadian Dollar (CAD) as Risk-Sentiment Rises

Risk-correlated currencies like the Canadian Dollar became more appealing to traders again last week, as geopolitical tensions between the US and North Korea appeared to cool.

On top of this, Federal Reserve interest rate hike bets have been weak due to mixed US data and cautious rhetoric from Fed officials. With bets of Fed action falling, investors are more eager to take risks.

Prices of oil, Canada’s most lucrative commodity, have also improved recently. US oil stocks have been falling and the US Dollar (USD) has been weak, making the liquid commodity more appealing. This supported the oil-correlated Canadian Dollar.

Overall, the rising demand for risky currencies and the broad weakness of the US Dollar has been the main reason for the Canadian Dollar’s strength in recent sessions.

This has helped the Canadian Dollar to remain sturdy despite Canada’s mixed July inflation report on Friday. Canada’s yearly inflation rate met expectations of 1.2%, improving from 1%.

The monthly print fell short of 0.1% forecasts though, and came in at a stagnant 0%.

Despite this, analysts noted that recent weakness in inflation was likely to have bottomed out already, as core inflation continues to rise.

Paul Ferley, assistant chief economist at Royal Bank of Canada, believes that the data will be mostly good news for the Bank of Canada (BOC);

‘I assume that the Bank will still take the view that, with growth coming in strong in recent quarters, it’s an indication that’s continuing and it will absorb capacity and eventually put more upward pressure on these measures, so they will start approaching closer to their 2 per cent target’

It also helped that the Pound wasn’t hugely appealing last week. Most of Britain’s recent ecostats have been disappointing, with inflation falling short of expectations and retail sales being mixed, indicating the UK pay squeeze could be having effect on consumer activity.

Due to the lower inflation stats and fading hopes of Bank of England (BoE) hawkishness, Sterling was unable to benefit much from a better-than-expected June labour market report either.

Pound (GBP) Forecast: UK Growth in Focus

The coming week’s economic calendar won’t be as busy, but the Pound could still find some sturdier ground to trade on if upcoming data impresses investors.

On Monday, July’s UK public sector net borrowing report will come in, which will once again show whether the value of the Pound has affected borrowing deficits.

Tuesday will follow with CBI’s industrial trends orders from August, with CBI’s distributive trades report from August coming in on Thursday.

Thursday’s biggest report will be Britain’s second Q2 Gross Domestic Product (GDP) projection however. UK growth is currently projected to have slowed from 2% to 1.7% year-on-year but edged higher from 0.2% to 0.3% quarter-on-quarter.

If UK growth beats expectations, it could boost hopes that Britain’s economy has been more resilient than expected in the first half of 2017. This could encourage investors to buy the undervalued Pound.

Will the GBP CAD Exchange Rate Soften on Latest Canadian Retail Sales?

The Canadian Dollar outlook is still generally optimistic despite last week’s mixed inflation stats, and while the economic calendar will be a little quieter until the end of the month there’s still some data to keep an eye on.

June’s Canadian wholesale sales report will be published on Monday, followed by key June retail sales results on Wednesday.

If Canada’s retail sales beat expectations, this could help the ‘Loonie’ to hold its recent gains.

However, if the US Dollar becomes more appealing or markets become risk-averse, the GBP/CAD exchange rate could quickly recover from its recent lows.

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TAGS: Pound Canadian Dollar Forecasts