The Pound Canadian Dollar (GBP CAD) exchange rate is struggling this week as Sterling sentiment has been hit by both slowing economic activity in September and rumours of infighting at the top of the Conservative party.
Pound Weakened by Poor PMI Data and Conservative Party Tensions
The Pound has gotten off to a poor start against the Canadian Dollar this week, having already ceded almost a cent as the UK’s manufacturing PMI slipped from 56.7 to 55.9 in September, with manufacturers’ profit margins weakened by rising input costs.
Tuesday also brought little relief to Sterling with the release of Britain’s latest construction PMI as it showed that activity unexpected contracted last month, with the index falling below 50 for the first time in over a year.
Also weighing on the Pound this week are concerns over the unity of the Conservative government. Observers are speculating that foreign secretary Boris Johnson may be preparing to make a leadership challenge as he appears to be undermining Theresa May by laying out his own plans for Brexit.
Johnson has made headlines in recent weeks as he offers his own vision for Brexit, at times contradicting the Prime Minister as he styles himself ‘the godfather of Brexit’ and with the Conservative Party Conference getting underway this week, the factures at the top of the Tory party are doing little to inspire confidence in investors
Canadian Dollar Lifted by Uptick in Manufacturing PMI
In contrast, the Canadian Dollar was strengthened on Monday by the release of the country’s own manufacturing PMI as data published by IHS Markit showed that it rose from 54.6 to 55 in September, with the outlook of those firms surveyed becoming increasingly upbeat.
Tim Moore, Associate Director at survey compilers IHS Markit, said;
‘Business optimism among manufacturing firms reached its highest level since April, which provides another positive sign for manufacturing conditions in the final quarter of 2017.’
GBP CAD Forecast: UK Services PMI to Also Slow in September?
The Pound’s fortunes for the remainder of this week will be largely riding on the release of the UK’s latest Services PMI, with any slowing in activity likely to see Sterling sentiment nosedive as it caps of a trinity of poor economic data from the UK last month.
Meanwhile the Canadian Dollar could slip this afternoon should the Bank of Canada’s (BoC) Deputy Governor Sylvain Leduc echo Governor Stephen Poloz in suggesting that the bank is likely to proceed a little slower after raising interest rates twice in recent months.
However the main focus for CAD investors this week will be Canada’s latest Trade Balance figures, set to be released on Thursday, with the recent recovery in oil prices forecast to narrow the country’s trade deficit from CA$3.04bn to CA$2.65bn in August, likely pushing the ‘Loonie’ higher.