The Pound Canadian Dollar (GBP/CAD) exchange rate fell on Tuesday. A rise in Canada’s October retail sales figures and rising crude oil prices weighed on the currency pair.
A lack of significant UK data also kept the pair of the defensive, as well as concerns over the impact of further strikes.
At time of writing the GBP/CAD exchange rate was at around C$1.6519, which was down roughly 0.4% from that morning’s opening figures.
The Canadian Dollar (CAD) climbed on Tuesday. The commodity-tied ‘Loonie’ was boosted by rising oil prices, as well as an unexpected leap in retail sales figures.
Crude oil prices rose amid a softer US Dollar (USD). Plans for the US to buy up to 3 million barrels of oil for its Strategic Petroleum Reserve also buoyed oil prices. The climbing prices pushed CAD higher.
The commodity’s gains were limited by signs of restricted Chinese demand, however. A surge in Covid-19 cases across the country has left markets uncertain as to the country’s economic recovery.
A healthy increase in retail sales figures also bolstered the Canadian Dollar on Tuesday. Sales rose by 1.4% in October after a slump in September. The gains were largely motivated by an increase in petrol prices.
The positive impact of the figures was limited however amid a forecast 0.5% decline for November’s retail sales.
Shelly Kaushik, an economist at BMO Capital Markets, said:
‘Looking ahead, a negative flash estimate for November points to continued weakness as consumers struggle with reduced purchasing power in the face of high inflation.’
The Pound (GBP) slipped on Tuesday amid thin trading conditions. A lack of significant data saw investors looks to domestic headlines as the UK faced further widespread industrial action.
A lack of meaningful progress on talks aimed at averting multiple strikes have failed to make meaningful progress this week. Tuesday saw a strike by NHS nurses, with a strike by ambulance staff expected to take place on Wednesday. Rail sector workers are also expected to sage further strikes in January.
A report from the House of Lords on the state of the UK’s labour market added to the UK’s poor outlook. The report stated a sharp rise in economic inactivity posed ‘serious challenges’ to the country’s economy.
Looking ahead to the rest of the week for the Pound, the latest data for the UK’s retail sector could pull the currency lower if it prints as forecast on Wednesday. December’s distributive trades figures from the Confederation of British Industry (CBI) are expected to confirm a further downturn in the already struggling sector.
On Thursday, the final reading of third quarter GDP growth figures could deepen Sterling’s losses. The data is expected to confirm a contraction in the UK’s economy which could add to recession forecasts. A forecast narrowing in the country’s current account deficit could stem losses for GBP, however.
Finally for the Pound, further industrial action across the country could continue to weigh on the currency. Health and rail sector strikes are expected to continue amid a lack of meaningful progress between unions and the government.
For the Canadian Dollar, inflation figures on Wednesday could dent confidence in the currency if they cool as forecast. The Bank of Canada (BoC) hinted at their last interest rate meeting that they could slow their pace of policy tightening. The inflation data could see markets pare back rate hike bets.
GDP data on Friday could also push CAD lower if they print as expected. October’s figures are expected to indicate another month of stagnation in Canada’s economy.
Any further shifts in oil prices could also cause movement in the commodity-tied ‘Loonie’.
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