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GBP CAD Fluctuates as Oil Prices Surge

September 20, 2017 - Written by Minesh Chaudhari

The Pound Canadian Dollar exchange rate fluctuated today with the Pound bolstered by positive UK retail sales figures and the Canadian Dollar boosted by a surge in oil prices.

UK Retail Sales Smash Expectations, Pound Gains



The Office for National Statistics (ONS) revealed today that retail sales in the UK grew by 1% month-on-month in August, beating the 0.2% growth estimate, July’s print of 0.7% and proving the highest uptick since April.

The year-on-year figure also proved robust by printing at 2.4%, thrashing both the last period’s figure of 1.4% and indeed the forecast of 1.4%.

These figures revealed that spending remains on good form, despite the increasing squeeze of low wage growth and soaring levels of inflation.

Ben Brettel, Senior Economist at Stockbrokers Hargreaves Lansdown, expressed optimism on the subject:

‘Spending has defied expectations of a slowdown since the Brexit referendum, and currently seems to be holding up despite weak wage growth and above-target inflation. This could bode well for economic growth - the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales. If this fails to materialise, the economy could see a stronger second half to the year’.

Sterling quickly rose as a result, with many investors hoping that this news will compel the Bank of England (BoE) to perhaps raise interest rates at the November meeting.

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Crude Oil Surges as Global Inventories Demonstrate Fall – CAD Climbs as a Result



Oil prices advanced today as markets became increasingly optimistic that production cuts are successfully working to cut down global inventories.

This surge was predominantly caused by comments on today’s data from the American Petroleum Institute, who reported growth of only 1.4 million barrels last week; well below the forecast of 2.9 million.

Beyond this an Iraqi Oil Minister also stated that OPEC and partners are considering extending output cuts – a means of reducing the global oversupply.

This news quickly drove oil prices soaring, putting this quarter on course to be the strongest Q3 since 2004 for crude oil prices.

Lukman Otunuga, an Analyst at FXTM surmised:

‘With oil prices steadily appreciating, as investors become increasingly optimistic over OPEC’s effort to stabilize the saturated markets, the cartel should be encouraged to extend the current deal, which may fuel the upside’.

With oil being Canada’s primary export, the ‘Loonie’ quickly raced ahead, though in the wake of the Pound’s own rally the pairing remained somewhat neck-and-neck.

GBP CAD Forecast: Volatility Ahead on Theresa May’s Brexit Speech



Market sentiment for Sterling is currently split between recent hawkish comments from the BoE and the ongoing manoeuvrings and controversies of Brexit.

Adding to the tumult, UK Prime Minister Theresa May will be speaking in Florence on Friday, her speech intended to shed some light on the future of the UK outside of the EU.

On one hand, markets are optimistic on the possibility that May will offer a set figure of £20 billion to the EU, payable in instalments until the end of a proposed ‘transition’ period. Such an event would likely ease the current negotiation deadlock – especially as the stagnation has predominantly been caused by on-going arguments regarding the proposed ‘divorce bill’.

On the other hand, May might not propose a figure and the deadlock might simply remain. In this situation the Pound would likely fall as investors grow increasingly anxious of the possibility of a ‘cliff-edge’ Brexit.
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