The Canadian Dollar put in a tame performance in the currency markets last week, taking the GBP CAD exchange rate above the 1.5900 level for the first time since the end of February. Two weak sets of data caused a sell-off for the CAD, with Thursday’s Retail Sales numbers for January and Friday’s domestic inflation figures both serving to disappoint investors holding Canadian Dollar-denominated assets. The data showed that Canadian shop prices are rising at a slower rate than analysts had been anticipating, making a near-term hike in interest rates by the Bank of Canada less likely and causing selling pressure on the Canadian currency.
Meanwhile, the Pound garnered support in the middle part of the week, with the release of the minutes of this month’s Bank of England Monetary Policy Committee meeting, which showed that only two of the nine-man committee had voted in favour of an increase in the Bank’s controversial Quantitative Easing scheme. However, Sterling came back to earth with a thump on Thursday when annualised UK Retail Sales numbers for February printed at 1.0% versus expectations of a 2.3% showing.
The Canadian Dollar steadied in late trading on Friday, following market whispers which suggested that Iran, which holds the third largest reserves of oil in the world, will be exporting 300,000 fewer barrels of crude per day, following the imposition of tighter sanctions by the West. This saw global crude prices head northwards; a continuation of this move would bring further support for the Canadian Dollar, potentially triggering a renewed run at the 6-month low of 1.5524 for the GBP CAD exchange rate. Conversely, stronger than expected UK Q4 2011GDP growth data on Wednesday, or disappointing monthly Canadian GDP numbers on Friday, could see the pair make another attempt at re-establishing itself in the 1.6000s for the first time this year.
