Sterling has had a tough morning against the CAD, following the release of the latest UK inflation figures.
UK inflation fell to 2.5%, which was under the expected figure of 2.7%. Whilst this is a positive in the sense that it is creeping back towards the government’s target level of 2%, it has also dampened expectations of a prospective interest rate hike by the Bank of England (BoE).
This had most likely been factored in to Sterling’s value, at least to some extent by investors, as such today’s data has caused a retraction of this sentiment and thus a sell off of GBP.
This morning’s developments will be welcomed by those client holding CAD and looking to buy Sterling, after weeks of seeing the CAD come under increasing pressure.
The Canadian economy was initially given a lift yesterday following a report by the International Monetary Fund (IMF), which stated that their economy was still likely to grow during 2018 and only at a slightly slower rate than predicted at the turn of the year.
It was only a few days ago that it seemed that the Pound was finding significant support around 1.80, as investors sold their CAD positions over fears that the global markets were in decline.
President Donald Trump’s trade tariffs were putting a huge strain on commodity based currencies such as the CAD, which relies heavily on its exports, particularly crude oil.
With global oil prices falling and other countries looking to counter Trump’s import tariffs with similar measures, the outlook for the CAD has looked rather bleak since the turn of the year.
That is why this morning’s move should be looked at as a prime opportunity for CAD sellers, as longer-term the issues mentioned are unlikely to disappear.
To put it in monetary terms any client selling 100,000 CAD position this morning compared to the lows of a couple of weeks ago, would receive an extra £1,500.
With NAFTA talks progressing slowly and Trump’s ability to cause a storm in almost any teacup, are those with CAD/GBP currency position prepared to gamble on the current rates and potential destabilisation of the global markets?