GBP/CAD Soars Ahead of BoC Poloz Speech

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate advanced considerably on Tuesday to reach a three-week-high as investors became wary that Bank of Canada Governor Stephen Poloz would reflect dovishly on recent commodity news.

Pound (GBP) Gains as ‘Brexit’ Fears Wane

Not only has the Canadian Dollar experienced its own domestic worries, the Pound Sterling has experienced a surprisingly bullish run in the last week as ‘Brexit’ concerns among investors lightened.

The GBP/CAD exchange rate was up almost 0.6% on Tuesday, and at the time of writing trended in the region of 1.8460. Making its second sustained gain since the week began, the pair has gained a considerable 200 pips since Monday morning.

A key reason for this movement has been decreased bets that the United Kingdom will ‘Brexit’ from the European Union in June. Recent poll results, and an article from The Telegraph suggest that an increasing number of ‘Remain’ voters intend to vote on Referendum day.

While the Pound had been recently volatile and unappealing to investors as a result of the economic uncertainty a ‘Brexit’ would bring, a perceived likeliness of Britain staying with the 28-member bloc bolstered Sterling sentiment.
Unfortunately not all UK news has been positive, as Tuesday morning’s BBA mortgage approvals report showed an unexpected from 45,646 to 45,098, disappointing forecasts that it would improve to 46,500.

Canadian Dollar (CAD) Weakened by Oil Futures, Poloz Warnings

Canada’s commodity worries continue this week as oil prices continue to fluctuate. Risk sentiment is generally low as investors are unclear as to whether oil prices will remain high or plummet again, and as Canada’s most lucrative commodity this has a close relation to the strength of the ‘Loonie’.

According to The Globe and Mail, a current expectation that oil demand could grow enough to meet the supply surplus this year have helped oil prices stay afloat, but there remains a possibility that maximised production from Saudi Arabia and Iran could cause an even larger supply surplus.

Risk-sentiment was throttled further by comments made on Tuesday afternoon by the Bank of Canada Governor Stephen Poloz.

In his New York speech, Poloz warned investors that trade may never return to pre-crisis levels, Bloomberg reports;

‘Global trade has reached a new “balance point” where it will contribute less to international growth than it did over the two decades before the financial crisis, Bank of Canada Governor Stephen Poloz said Tuesday in New York.
The surge in global trade that occurred in the 1990s and 2000s was a historical exception, Poloz said in a speech to Canadian and US securities industry associations, reflecting a pace of globalization that won’t be replicated. While slower trade will reduce the global economy’s ability to grow, it isn’t necessarily a sign of underlying deterioration, he said.’

However, at the same time Poloz’ assertion that markets should not worry about a recession may have softened blows and allowed the ‘Loonie’ to regain some strength.

GBP/CAD Forecast: British GDP Tomorrow, Canadian GDP Friday

This week’s data releases are due to be more busy from Wednesday onwards, with key reports due for both the UK and Canada for the remainder of the week.

Wednesday’s session sees the release of Britain’s highly anticipated Gross Domestic Product (GDP) report. Currently, the year-on-year print is tipped to slow from 2.1% to 2.0%, while the quarterly release is expected to decrease to 0.4% from 0.6%.
More key data releases on Friday, with Britain’s GfK consumer confidence survey releasing first thing in the morning, followed by consumer credit and another mortgage approval report before midday.

In what looks to be this week’s sole key Canadian dataset, Friday afternoon sees the release of Canadian GDP which is currently estimated to improve from 1.5% to 1.6% year-on-year. The monthly figure, on the other hand, is projected to have contracted slightly at -0.1%.

As always, developments in the commodity trade are likely to impact the commodity-sensitive ‘Loonie’, with markets currently particularly focused on oil, Canada’s primary commodity.

At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate traded at around 1.8460, while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate trended in the region of 0.5412.