- Key UK Headlines for This Week
- A GBP/USD Bargain in the Making
- Weak Data Weighs on Canadian Dollar (CAD)
The British pound (GBP) traded lower against the euro (EUR) and US dollar (USD) despite an uptick in UK house prices. According to property Web site Rightmove, house prices rose 2.8% in the October, erasing last month's 1.5% decline.
There are a number of UK event risks worth watching this week, but they will not come into focus until Wednesday. At that time, the minutes from the most recent Bank of England (BoE) meeting will be released, and we will get a much better sense of how the central bank feels about the recent deterioration in UK data.
Given that the UK experienced three months of positive data surprises, one month of weakness is not likely to make the central bank overly concerned, and therefore, the near-term outlook for GBPUSD hinges upon US data.
After rising strongly at the end of last week, GBPUSD is consolidating below its 2013 high. The strength of US non-farm payrolls will determine whether this is a near-term top for the pair, or a pause before further gains. In the long run, we are still bullish GBPUSD and would see any move down to 1.60 as an opportunity to come in at lower levels.
Weak Data Puts CAD at a Disadvantage
All three commodity currencies lost value against the dollar on Monday. The steepest loss was in the New Zealand dollar (NZD), followed by the Australian dollar (AUD) and Canadian dollar (CAD). The selloffs were modest for all three, however, and represent nothing more than corrective pullbacks.
Canada’s wholesale report was the only data on the economic calendar, and according to the report, sales grew at a slower pace in the month of August. Wholesale sales rose 0.5% in the month of August, as compared to 1.7% the previous month, but the headline release was not nearly as weak because of the upward revision to the July report and the larger-than-expected increase in August.
Most importantly, however, wholesale sales are a leading indicator for tomorrow's Canadian retail sales report. The data suggests that consumer spending growth in Canada slowed, which could reverse some of the recent gains in the CAD.
Signs of vulnerability in the domestic economy and questions about the cost of the US government shutdown will keep the Bank of Canada (BoC) on hold later this week. We expect USDCAD to have a delayed reaction to the Canadian retail sales report because it will be released at the same time as US non-farm payrolls.
By Kathy Lien of BK Asset Management
- Canadian Dollar