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Stable Oil and a Brief Risk-Rally Leaves Canadian Dollar Stronger

Last week’s high: C$1.7473

Last week’s low: C$1.7304

GBP/CAD Falls as Canadian Dollar Takes Advantage of Pound Weakness

While the Canadian Dollar has seen little in the way of support from domestic data lately, the Pound to Canadian Dollar exchange rate still tumbled last week. Pound weakness on Brexit uncertainties, as well as a brief boost in demand for risky commodity-correlated currencies like the Canadian Dollar, made it easier for CAD to strengthen.

Prices of oil, Canada’s biggest export commodity, slumped in the middle of the week but finally firmed before markets closed on Friday. This rising oil price has made the Canadian Dollar more appealing.

On top of this, the Bank of Canada (BoC) has indicated that temporary fluctuations in oil were unlikely to have a negative impact on its monetary policy outlook. As a result, Canadian Dollar trade was more bullish amid expectations of further gradual rate hikes from the BoC.

Pound trade may have seen stronger demand on the back of the UK government’s relatively soft Brexit plan, but US President Donald Trump’s criticism of the Brexit plan knocked Sterling lower on Friday, before recovering somewhat when Mr Trump called the report ‘fake news’.

CAD Outlook: Inflation Data and Central Bank Speculation in Focus

Many highly influential UK and Canadian ecostats will be published next week, including June inflation results from both nations. With inflation in focus, Central Bank speculation is likely to be a big driver of GBP/CAD movement throughout the week.

Figures for Britain’s wage growth in May will take focus on Tuesday, followed by UK inflation on Wednesday. If they beat expectations, this could boost confidence that the Bank of England (BoE) will hike UK interest rates again as soon as its August policy decision next month.

Similarly, Canada’s June inflation results on Friday could influence bets on how long the Bank of Canada (BoC) will wait to hike Canada’s interest rates again.

Of course, on top of domestic data the Pound to Canadian Dollar exchange rate will be influenced by any surprising developments in the Brexit process or the US-China trade dispute.

As the UK government’s Brexit plans lean towards a softer version of leaving the EU, the Pound to Canadian Dollar exchange rate could spend most of the week steadily advancing.

Key Events

16th July

13:30 Canadian Foreign Securities

17th July

09:30 UK Job Market Report

13:30 Canadian Manufacturing Sales

18th July

09:30 UK Inflation Rate

19th July

09:30 UK Retail Sales

13:30 Canadian ADP Employment Report

20th July

09:30 UK Public Sector Net Borrowing

13:30 Canadian Inflation Rate

13:30 Canadian Retail Sales

 

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To keep up to date with the Canadian Dollar, visit the CAD blog in our Currency News section.

Alastair Archbold
Currency Trader
T: 01442 892 062

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