The Canadian Dollar retreated from GBP and other rivals on Tuesday after declines in stock and commodity prices. CAD is also awaiting the Bank of Canada’s (BoC) interest rate decision which will likely be the main driver of the currency going forward. Meanwhile, GBP saw a boost after surprising employment data figures which allowed the GBP to edge over some of its major rivals. There is a new spur of optimism surrounding the Pound Sterling, with bets recently reaching around 70% chance of a rate cut by the end of the month, this new positivity could be very timely for GBP.
CAD retreats on GBP after Coronavirus spreads to Japan and Thailand and commodity prices fall
The Canadian Dollar has seen success in recent weeks, being seen as one of the more resilient currency’s in the major trading market. But this week sees the currency come under fire as oil prices and stock markets sharply fell on Tuesday amid panic about the prospect of a severe-acute-respiratory-syndrome-like (SARS) pandemic in Asia given the outbreak of Coronavirus. Investors were reminded of a similar incident in 2002-3 which caused havoc to the markets and saw many people suffer at the hands of the SARs virus.
Reports from China suggest that the virus is more infectious than previously thought, with it spreading as far as Japan and Thailand, while around 100 cases have also been reported in Hong Kong. The impact of the virus could be hefty on the global economic activity as the second largest economy and world’s most populous country, in China, is affected. This is why oil, other commodities and stock markets were down yesterday. However, the virus worries were not all that affected the CAD, with the currency suffering most losses against the GBP following the UK’s positive jobs data.
GBP edges over CAD as strong jobs data impresses and reduces BoE pressure
GBP rallied on Tuesday after positive results came from the UK labour market data for December. There appeared to be growth in employment figures and wage growth which showed signs of an economy which may not necessarily require a rate cut. This news relieved pressure from the BoE who have been tipped at around a 70% chance of making a rate cut at months-end in recent days. Investors ae hoping that GBP can continue this run going into Friday as the UK’s flash PMIs will be released.
Later today will see the release of the BoC’s interest rate decision which is likely to be the highlight of the week for the CAD. Investors will be looking to see the rate remain unchanged moving forward as the CAD put up a resilient fight over the past couple of weeks despite it’s rivals poor performances.
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