The GBP CAD exchange rate is stuck around opening levels today, but at 1.77 that still leaves the pairing around its best valuation since the Brexit referendum.
Pound Gains on Canadian Dollar despite Weaker-than-Expected GDP Figures
Poor Canadian retail sales figures weakened the Canadian Dollar on Wednesday, after figures showed a -0.6% decline instead of stagnation in February after January’s 2.3% growth.
GBP CAD advances were interrupted on Thursday after US President Donald Trump performed a swift U-turn on his intentions to withdraw from the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico.
It was announced that Trump would shortly sign an executive order to break up the deal, but just a few hours later the President claimed he would not do so and would instead seek to renegotiate.
This gave the Canadian Dollar a temporary respite. However, the Pound was able to continue making gains on Friday, despite having the same headwinds to contend with.
UK first-quarter GDP was expected to slow from 0.7% to 0.4%, but instead fell to 0.3% on the quarter and advanced to 2.1% instead of 2.2% on the year.
Canadian GDP also printed poorly, allowing Sterling to remain dominant. On the month the economy stagnated rather than growing by 0.1% after January’s 0.6% expansion.
Year-on-year GDP accelerated from 2.3% to 2.5% instead of 2.6%.
GBP CAD Stuck at Opening Levels as Oil Prices Rebound
The Pound Canadian Dollar exchange rate is stuck around opening levels today thanks to a rise in the region of 0.8% for crude oil prices.
A new report from the American Petroleum Institute suggests that US stockpiles of crude oil have declined sharply, indicating demand for crude will pick up in the coming weeks.
According to the report, US stockpiles shrunk -4.2 million barrels last week, while energy consultancy Petromatrix claimed inventories of gasoline narrowed by -1.9 million barrels.
This has allowed the Canadian Dollar to resist the Pound today, even though the second UK PMI of the week has defied forecasts to increase.
Yesterday’s Markit manufacturing index rose from 54 to a three-year high of 57.3, while today’s construction PMI has climbed from 52 to 53.1.
These are welcome results after the latest GDP figures confirmed fears of a slowdown in the first quarter, as they suggest a brighter outlook for Q2.
However, news that the EU has revised up its estimate for the Brexit divorce bill the UK must pay to €100 billion (up from €60 billion) is concerning investors.
Will UK Services PMI Boost Pound Sterling with Above-Forecast Growth?
Tomorrow’s UK services PMI will be the one to watch, as the service sector is by far the main driver of the UK economy.
As with the manufacturing and construction indices, forecasts expect to see activity weakening, but there is a chance growth will have accelerated.
Meanwhile, Canadian trade figures are released tomorrow and are expected to show a slightly higher deficit of -CA$1 billion than in February.
Later in the evening, Bank of Canada (BOC) Governor Stephen Poloz will give a speech in Mexico; this could cause notable volatility for GBP CAD, as Poloz may mention not only monetary policy but also – given the location – NAFTA.