GBP/CAD weakened for most of 2016, and especially following the Brexit vote. After strengthening slightly in January 2017, the pair took off in April following Theresa May's call for an early election. As the Conservatives fared poorly in the following election, GBP/CAD gave back most of its initial gains. The Canadian dollar also strengthened substantially in the latter half of 2017, given strong economic growth and interest rate hikes.
Pound sterling is currently flat against all major currencies except the Japanese yen and the euro. Yesterday, the pound moved slightly higher against the US dollar after moving into oversold territory earlier this week. Thanks to a broad rebound across all 'risk on' currencies, the pound benefited accordingly. Today's GBP/USD trading range remains 1.2660 - 1.2940.
July year-over-year retail sales growth numbers both smashed expectations and accelerated relative to the previous monthly figures. Thanks to weakening base effects (at this point last year, retail sales growth was both low and decelerating), recent retail sales numbers have been fairly strong. Other economic indicators, such as industrial and manufacturing production growth, have also accelerated in recent history. Unfortunately, the data had a limited impact on the currency.
Looking at the pound more broadly, yesterday's rebound was particularly weak. Other 'risk on' currencies such as the euro and the Australian dollar have fared far better against the US dollar in recent history. Our outlook on the British pound remains bearish.
GBP/USD is currently above 1.2710. EUR/GBP is up slightly, with the pair trading above 0.8950. The pound is down slightly against the Australian dollar and flat against the Canadian dollar. GBP/AUD is currently above 1.7490, while GBP/CAD is above 1.6710.
|August 14||Claimant Count Change JUL||6.2K||9K|
|August 14||Employment Change MAY||42K||137K|
|August 14||Average Earnings excl. Bonus JUN||2.7%||2.8%|
|August 14||Average Earnings incl. Bonus JUN||2.4%||2.5%|
|August 15||Core Inflation Rate YoY JUL||1.9%||1.9%|
|August 15||Retail Price Index YoY JUL||3.2%||3.4%|
|August 15||Inflation Rate YoY JUL||2.5%||2.4%|
|August 15||PPI Input YoY JUL||10.9%||10.3%|
|August 15||PPI Output YoY JUL||3.1%||3.3%|
|August 16||Retail Sales ex Fuel YoY JUL||3.7%||2.9%|
|August 16||Retail Sales YoY JUL||3.5%||2.9%|
The Canadian dollar is currently mixed. The loonie is selling off against the euro and the Australian dollar, while strengthening against other major currencies. Yesterday, the loonie was the weakest major currency, ending the day lower against its peers. Despite a small rally in commodity prices and a softer US dollar, the Canadian dollar was out of favor, ending lower against the US dollar for the second consecutive day. Today's trading range for USD/CAD is 1.3080 - 1.3390.
Growing uncertainty regarding NAFTA negotiations is starting to weigh on the Canadian dollar. Yesterday, US trade representative Robert Lighthizer said he hopes there will be a breakthrough in NAFTA negotiations in the next few days. However, US President Donald Trump told Lighthizer that he is in no rush for a resolution, and is ready to walk away from talks if necessary. Trump said that "We’re either going to do a fair NAFTA for us or we’re not going to do NAFTA at all.” He added that “If you can’t make the right deal, don’t make it.” Trump has been vocal about NAFTA negotiations recently, casting doubt on whether or not the US, Mexico and Canada can reach an agreement.
Later today we'll see Canadian inflation numbers. Traders will be looking for signs that inflation is continuing to strengthen after last month's 2.5% year-over-year increase showed the biggest pick-up in inflation since 2012. Rising inflation is a major factor in the Bank of Canada's monetary policy, and continued strength increases the likelihood of future rate hikes. Yesterday we downgraded our outlook for the Canadian dollar to bearish.
The USD/CAD exchange rate is currently above 1.3130. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.4980. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.6710. CAD/JPY is flat, and currently trading above 84.30.
|August 15||New Motor Vehicle Sales JUN||204.4K||220.3K|
|August 16||ADP Employment Change JUL||11.6K||-10.5K|
|August 16||Manufacturing Sales MoM JUN||1.1%||1.4%|
|August 17||Core Inflation Rate YoY JUL||1.3%|
|August 17||Inflation Rate YoY JUL||2.5%|
|August 17||Foreign Securities Purchases JUN||C$2.18B|
|August 17||Foreign Securities Purchases by Canadians JUN||C$5.69B|
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