Canadian dollar (CAD) Being Sold Once More vs the British Pound (GBP) and US Dollar
- Written by: Gary Howes
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The Canadian dollar (CAD) has seen downward pressure resume once more on Thursday; the losses come after a particularly poor session in the preceeeding day.
According to Citi’s Economic Surprise Index, Canada has fallen to -13.6, the lowest among most major nations, reflecting the rising trend of worse-than-expected data in Canada.
"This will likely dampen the investment sentiment of CAD. Technically, USD/CAD may rise to 1.1236 and may find support at 1.0911," say Citigroup.
The CAD was initially sold off following the release of data on Wednesday morning that showed a 1.4% (m/m) drop in Canadian wholesale trade in December, much weaker than the 0.5% (m/m) decline expected.
It was the latest in a growing list of disappointing Canadian economic reports over recent weeks.
The British pound to Canadian dollar is now 0.94 pct higher at 1.8441. Elsewhere, the USD vs CAD is 0.9 pct higher at 1.1048. The EUR vs CAD is 0.86 pct higher at 1.5195.
We hear from ForexLive that the selling in CAD has been helped along by Canadian Natural Resources buying around $2.8bn of US natural gas assets via Devon Energy. Devon are said to be selling up various parts to focus on shale.
(Be Aware: All CAD quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.)
As our earlier piece points out, the Canadian currency could be due for another bout of weakness.
The rout of the CAD by the British pound is eye-opening as it was the GBP that was today's initial underperformer.
Sterling sold off after it was shown that the UK unemployment rate rose unexpectedly to reach 7.2 pct last month, analysts had expected a reading of 7.1 pct.
However, as we argue here, traders have since decided that on balance the report was constructive.
Focus returns to the US Fed
The outlook for currency markets will return to the US Federal Reserve.
Analyst Kathy Lien at BK Asset Management notes:
"The release of last month's FOMC minutes is one of the most important events for the foreign exchange market this week but minutes do not always have the same impact on currencies as the initial rate announcement.
"We already know that the Federal Reserve's decision to reduce asset purchases by another $10 billion last month was unanimous.
"While U.S. economic data took a turn for the worse, the central bank completely ignored the deterioration and said further improvement is seen in labor market conditions and economic activity "picked up" from the previous month."
