Despite a Bank holiday in Canada on Monday, it has been a very eventful week so far. In today’s report we will look at where the GBP/CAD exchange rates have headed and what has caused these movements.
Poor UK inflation data causes doubt over interest rate rise
They say what goes up, must come down and Sterling has held true to the saying this week. Over the past few months the Pound has gone from strength to strength against a basket of major currencies. There are two main causes for this, the Scottish no vote, which caused a “relief spike” in favour of sterling when the vote came in and the speculation around the Bank of England raising interest rates in the near future.
It is the same two reasons that caused the Pounds decline this week. Firstly, the Pound was over bought following the no vote and the GBP crosses have started to retrace their steps because of it. The main cause for the drop in GBP exchange rates was due to the data releases yesterday. We saw CPI, PPI and HPI all come in below the forecast figures. This showed that UK inflation is at a 5 year low at the moment. This in turn means there is less pressure on the BoE to raise interest rates in the near future. It has previously been suggested this will happen in early 2015 but with the latest figures, many believe this will be put back to later in the summer next year.
Canadian Dollar hit by Oil prices
Despite Sterling falling away against a basket of major currencies over the last week, the GBP/CAD exchange rates has risen from around 1.7950 to over 1.81. So what has caused the Sterling to Canadian Dollar exchange rates to climb? In a word, Oil. The latest figures have just revealed that global Oil prices have fallen around 20% since the Summer. Given Canada’s economy is largely commodities based and Oil is Canada’s main export, this has hit the Loonie hard.
Where are the GBP/CAD exchange rates heading?
Despite the poor inflation figures, the latest numbers state the unemployment is down and the UK economy appears to be recovering faster than its Canadian counterpart. The decline in Oil prices isn’t likely to bounce back immediately and could effect the Loonie for some time.
With this in mind, if you have an up and coming currency purchase, it just goes to outline the importance of speaking with one of our specialists, to help choose the best time to buy your currency.
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