Last week’s high: C$1.7132
Last week’s low: C$1.6992
Signs of BoC Optimism Boost Canadian Dollar
Demand for the Canadian Dollar picked up sharply over the course of the last week after the Bank of Canada (BoC) sounded a more optimistic note on the economic outlook.
As the BoC left interest rates on hold at its May policy meeting, as anticipated, the accompanying commentary indicated a belief that the recent slowdown is already easing.
This positive outlook was backed up by Friday’s gross domestic product data, which bettered forecasts with a quarterly growth rate of 0.5%.
However, the weakness of the GBP/CAD exchange rate was limited ahead of the weekend thanks to the latest developments in US trade policy.
The surprise announcement that the US will impose tariffs on Mexican imports provoked a sharp increase in risk aversion, denting the risk-sensitive Canadian Dollar.
CAD Outlook: Canadian Dollar Vulnerable to Manufacturing Sector Contraction
CAD exchange rates could come under further pressure this afternoon if May’s manufacturing PMI remains in a state of contraction.
Signs of continued weakness within the Canadian manufacturing sector may undermine recent confidence, exposing the Canadian Dollar to another bout of selling.
If the economy appears on course to lose momentum in the second quarter, unwinding some of the improvement of the first, this could weigh heavily on CAD exchange rates.
Political jitters look set to keep the Pound on the back foot, meanwhile, as markets continue to speculate over Theresa May’s most likely successor as prime minister.
The latest round of UK PMIs could also put pressure on the GBP/CAD exchange rate if growth fails to pick back up on the month.
If the services PMI moves closer to contraction territory this could see the Pound trending sharply lower across the board.
09:30 UK Manufacturing PMI
14:30 Canada Manufacturing PMI
09:30 UK Services PMI
13:30 Canada Trade Balance
13:30 Canada Unemployment Rate
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Foreign Exchange Manager