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The CAD - Canada Dollar weekly update 30 Jun 2008
In this week's
update: Sterling rates steady for now
- UK mortgage approvals slump
- Little guidance from Canadian data
Having dipped from $2.0050 to $1.99 Sterling found solid support that resisted several attempts to push it lower. It rallied sharply to $2.0150 on Thursday and fell back just as quickly on Friday morning before a second spike took it as far as $2.02. From there it faded to open in London this morning at $2.01.
The week's economic data were not particularly helpful to Sterling. Its saving grace was that figures from elsewhere were almost equally as lacklustre. The highlight - if a negative figure can be referred to as such - was the CBI Distributive Trades survey. After the previous week's unbelievably strong Retail Sales performance the market was ready for a burst of harsh reality from the shopkeepers. Forecasters were going for a 16 reading so when it turned out to be only 9 there was a degree of relief.
Rather less satisfactory was mortgage activity among BBA members. The Independent was perhaps exaggerating when it said "the number of mortgages approved for house purchases slumped to an all-time low." It would be a surprise if the figure had not been lower in, say, 1914 or 1939. Yet the point was well made that, compared to a year ago, fewer than half as many people are buying. According to the BBA, "only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders." Scant consolation when there are 15 sellers for every buyer.
Bank of England Governor Mervyn King was slightly less gloomy than usual during his Q&A session at the parliamentary Treasury Committee. He repeated his story about inflation rising above 4 per cent by the end of the year but was evasive about what might happen to interest rates. The media and the market were left guessing and failed to come up with any firm conclusion.
The Loonie pushed ahead against the US Dollar, coming within half a cent of parity and adding a cent on the week. Its success was more to do with the Greenback's failure than with anything positive from north of the border. All week the market was obsessed by the Federal Reserve's interest rate decision on Wednesday; first in anticipating what the statement might say, then by the analysis of that statement. With virtually no useful economic data to work on the Canadian Dollar was left to flounder, and flounder it did.
The SME business barometer showed falling optimism and factory prices were driven higher by energy costs. Otherwise there was a dearth of statistics and tradable news from the Canadian economy.
The coming week has little more to offer. Canada Day on Tuesday and US Independence Day on Friday will add to the festive spirit and detract from activity. Sterling runs the risk of two house price indices, neither of which is likely to show a resurgence of the residential property market. It leaves us with the tried and tested formula to minimise risk: Buyers of the Canadian Dollar should hedge, buying half their requirement forward.
For more information and expert guidance on the currency markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility.
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