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Monthly Currency Update - GBP/CAD September 09

Monthly Currency Update - GBP/CAD September 09

Old Sep 2nd 2009, 11:21 pm
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Default Monthly Currency Update - GBP/CAD September 09

Hi All,

Here is an update of what’s been happening in the Currency Markets throughout August with the Canadian Dollar.

GBP/CAD closed broadly unchanged at the start of the month, reversing lower from a fortnightly high after the Bank of England surprised financial markets with a decision to expand its quantitative easing package by £50 billion.

However, the CAD failed to fully capitalise on the late bout of Sterling weakness as Canadian job losses in July were more than double what had been expected, prompting the finance minister to speak out and try to calm any “euphoria” over an imminent economic recovery. Statistics Canada said that the economy suffered net job losses of 44,500 in the month, more that double the number forecast as employers cut workers even though the economy is commonly thought to be on the mend after its worst recession since the early 1990’s. However, the unemployment rate remained unchanged at an 11-year high of 8.6% as fewer people stayed in the labour market looking for work.

Imports in June dropped 1.3% to CAD29.3bln, the lowest level since 2004. A separate report on recently revealed the value of Canadian manufacturing shipments jumped by 1.9% in June from May, posting the first increase in four months on stronger aerospace and energy sales.

In the UK, recent Unemployment figures showed a 13 year high which had a negative effect on the Pound as they suggest that the deterioration in the labour market is yet to show signs of stabilisation.

The local Dollar erased initially losses against the Pound despite Canadian consumer prices falling at their steepest rate in 56 years in July, due to a sharp decline in energy costs. Overall prices dropped 0.9%y/y, reflecting a 23.4% collapse in energy prices. Economists had expected a 0.8% decline in overall prices in July from July 2008. The actual figure – the steepest drop since 1953 – is far weaker than the Bank of Canada’s target range of around 2.0% annual inflation. The core annual inflation rate – closely watched by the BoC – dropped to 1.8% from 1.9% in June. The Central Bank has promised to keep its benchmark interest rate at a record low of 0.25% through to June 2010, conditional that inflation remains under control.

GBP/CAD initially fell to a two-month low last week after Sterling tumbled and the Canadian Dollar rallied on improved domestic data. Canadian retail sales grew much faster than expected in June, the latest in a series of upbeat economic numbers to raise hopes the economy is pulling out of recession. Sales jumped 1.0% from May, far surpassing forecasts for a 0.2% increase. But much of the rise was due to rising energy prices, especially for petrol, while volumes of sales inched up by just 0.4%. Sales were down 4.4% from a year earlier. However, the local Dollar pared some of its gains on Tuesday as oil prices skidded from a 10-month peak while a Bank of Canada official warned that the currency’s strength could hurt the nation’s economic recovery.

Current Central Bank Rates:

Canada (Bank of): 0.25% (next meeting 10th September)
UK (Bank of England): 0.50% (next meeting 10th September)

GBP/CAD Highs & Lows of August:

High: 1.8321
Low: 1.7607

A movement of: 4.06%

Difference this would make on £200k

High: 366,420 CAD
Low: 352,140 CAD

A difference of: 14,280 CAD

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Mark Bodega
Director - HiFX
Windsor2 is offline  

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