GBP/CAD Exchange Rate Strikes Two-Month Low as Manufacturing PMI Disappoints
The Pound Canadian Dollar (GBP/CAD) exchange rate continues to be driven lower this afternoon in the wake of the UK’s latest Manufacturing PMI.
Investors have soured on Sterling (GBP) today as activity in the UK’s manufacturing sector was shown to have slowed to a 17-month low in April, prompting fears the UK’s second quarter may be off to a rocky start.
This also appears to have eliminated any lingering hopes of a rate hike from the Bank of England (BoE) next month, further pressuring the GBP/CAD exchange rate.
Meanwhile the Canada Dollar (CAD) accelerated its gains this afternoon following a stronger-than-expected rise in domestic inflation in February.
GBP/CAD Exchange Rate Nosedives as Poor Growth Figures Threaten BoE Rate Hike
The Pound Canadian Dollar (GBP/CAD) exchange rate initially ticked higher last week, aided by some upbeat borrowing figures which saw government borrowing strike an eleven-year low.
However, this mean very little in the face of the UK’s latest GDP figures, which revealed domestic growth slowed from 0.4% to just 0.1% in the first quarter.
This prompted a major sell-off of Sterling (GBP), with analysts raising concerns this would further dampen the chances of the Bank of England (BoE) voting to raise interest rates in May.
Meanwhile the Canadian Dollar (CAD) was in a strong position to take advantage of the weakness in GBP last week as it was buoyed by the continued strength of oil, with prices holding close to a three-year high.
Sterling Canadian Dollar (GBP/CAD) Exchange Rate Tumbles as Manufacturing Activity Slows
The Pound (GBP) has continued to slide against the Canadian Dollar (CAD) at the start of this week as the UK’s factory growth was shown to have slowed again last month.
According to data published by IHS Markit, the UK’s manufacturing PMI tumbled from 55.1 to 53.9 in April, with factory activity striking a new 17-month low.
This struck another heavy blow against Sterling as it suggests the UK economy may have got gotten off to an even poorer start in the second quarter than it did at the start of the year.
Also weakening the GBP/CAD exchange rate were suggestions this would further dent the case for the BoE to raise interest rates this month.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
‘It appears the disappointing start to the year is set to continue in the second quarter … decision makers will no doubt be hesitating over whether this really is the best time to raise interest rates again.’
Canadian Dollar (CAD) Exchange Rates Lifted as Trump Postpones Steel Tariffs Exemption
At the same time the Canadian Dollar’s (CAD) advance this morning has been aided by an announcement by US President, Donald Trump, regarding an extension of the steel tariff exemptions for key US allies including Canada.
The news will come as a welcome relief for Canada’s steel industry as the tariffs on all steel imported into the US had been due to come into effect by the end of Tuesday.
This will also give more time for the two countries to renegotiation NAFTA, which remains a point of concern for many CAD investors.
GBP/CAD Exchange Rate Forecast: ’Loonie’ Could Weaken if BoC not Forthcoming with Rate Hike
Looking ahead the UK will publish its remaining PMI figures for both the construction and service sectors later this week, with a slowdown in either likely to weigh heavily on the GBP/CAD exchange rate.
In the meantime Canada will publish its latest GDP figures on Tuesday afternoon, with the Canadian Dollar (CAD) potentially strengthening if domestic growth is shown to have sped up again in February, as expected.
However any potential gains in the CAD exchange rate could be trimmed towards the end of the session following a speech by the Bank of Canada’s (BoC) Governor, Stephen Poloz.
While another rate hike from the BoC still looks likely this year, there are still no clear plans as to when, meaning the ‘Loonie’ could weaken if Poloz hints that rates are likely to remain on hold for the immediate future.