For those of you following the Sterling, here is Juliana Scolari’s latest update on monetary activities.
According to Moneycorp’s research, the Bank of Canada is maintaining their 1% interest rate as the Canadian Dollar gets pulled in different directions, trying very hard to stand out on it’s own out of the US shadow. Read Juliana’s report to get the big picture of what’s new and please don’t forget to leave us your thoughts and comments.
CAD weekly currency update: UK spending power improves
Inflation abates to 4.2% while average earnings accelerate to rise by 2.3%. Canadian interest rates expected to remain at 1% this week.
A two-and-a-half-cent range included half a dozen reversals of direction that ultimately led nowhere. To all intents and purposes sterling was unchanged from one Monday morning to the next.
Sterling did its best to keep its head down, with few UK economic statistics to mess things up. The RICS house price balance and the BRC retail sales monitor came out early on Tuesday. Both figures were bad in the traditional sense; the RICS figure showed a net 27% of estate agents reporting lower prices and the BRC said retail sales in June were down by -0.6% compared with June last year. However, both were better than the previous month’s result so they didn’t create too much mischief. On Friday, Rightmove reported a -1.6% monthly fall in residential property asking prices that left them still a long way from reality. Seven out of ten properties offered for sale this year are still in the estate agent’s window and there was not even the hint of a suggestion that the other three had sold.
The two data sets most likely to make a difference were Tuesday’s inflation figures and the employment numbers on Wednesday. After rising by 4.5% in the 12 months to April and May, Britain’s consumer price index went up by only 4.2% in the year to June. The Bank of England is sure to have been happy to see the tick-back, as are savers who now see their money being eroded less quickly. Investors, who might have been expected to see the change as lessening upward pressure on interest rates, did not seem perturbed.
Nor were they taken aback on Wednesday by a higher than expected 24.5k monthly increase in the number of people claiming jobseekers’ allowance. Instead they apparently focused on average earnings, which were up by an annual 2.3% in the May quarter. Combined with the drop in inflation to 4.2%, it means spending power is falling by only -1.8% a year rather than the -2.5% implied by the previous month’s figures. It might not be cause for celebration on the high street, but at least it’s a step in the right direction.
The Canadian dollar was torn in two directions. On the one hand it was held back by its close relationship with the US dollar; on the other, it was able to present itself as an alternative to the Greenback. As the week progressed, investors became increasingly worried that the administration might fail to reach agreement with congress over an increase in the debt ceiling before the government runs out of money on 2 August. Were that to happen, America would almost certainly lose one of the As from its AAA credit rating. But it almost certainly will not happen; even the most intransigent politician can see the danger in calling in a downgrade on the country’s head. Though as long as it could, any alternative to the US dollar is better than none.
The Canadian economic indicators were not particularly helpful. At -$814 million, May’s trade deficit was close to forecast. Manufacturing shipments fell by -0.8% in May, more than expected. And that was the lot. This week will be busier. There are motor vehicle sales, international capital flows, wholesale sales, retail sales and CPI inflation. Today, the Bank of Canada announces its monetary policy decision, which is expected to keep the benchmark interest rate at 1%.
The week brings even fewer UK ecostats than the one just gone. Beyond Nationwide’s consumer confidence index, public sector net borrowing and June’s retail sales there is nothing other than the minutes of the Monetary Policy Committee’s July meeting.
The last few days have thrown up multiple examples of the FX market’s unpredictability and there will almost certainly be more this week. Buyers of the Canadian dollar would be wise to use a forward purchase to fix a price for half the money they will need.
Written by Juliana Scolari, Account Manager, Moneycorp Inc
Juliana Scolari has recently joined Moneycorp as an Account Manager in Florida. Originally from Brazil, Juliana obtained her Bachelor’s degree in Hospitality Management in Sao Paulo and then moved to Florida to work for Walt Disney World Resorts. She has spent the past 4 years as in-house management for an international mortgage lender and was instrumental in establishing and penetrating market share in the South and Central Central American markets.
Juliana is fluent in Spanish and Portuguese and has more than ten years of experience in dealing with international business clientele. She uses her strong work ethic and positive, outgoing personality to ensure effective communication and service with customers; she recently graduated from Stetson University with a Masters in Business Administration to further reinforce her knowledge and management style.
To start taking advantage of her services, you can register online here and she will then be in touch. Opening an account with is completely free and comes with no obligation to use their services. Alternatively, you can contact Juliana directly at: +1 407 352 5890.