GBP/CAD Exchange Rate Continues to Rise – now up 1% as Labour Productivity Disappoints
UPDATE 14:52 BST: Sterling is continuing to trade higher against the Canadian Dollar (GBP/CAD) this afternoon following some poor productivity figures from Canada.
Q1 labour productivity was forecast to grow moderately at a rate of 0.3%, but instead fell by -0.3%. This does not bode well for the Canadian economy, with the Canadian Dollar (CAD) also suffering from threats caused by trade tariffs and a breakdown in NAFTA renegotiations.
Not helping matters, the price of crude is also down 1.63% on the day, hitting the value of Canada’s largest export.
Continued Optimism on UK Services Sector Data Boosts GBP/CAD Exchange Rate
UPDATE 13:02 BST: The Pound (GBP) has continued to extend its lead against the Canadian Dollar (CAD) today, rising to the best exchange rate in over two weeks.
This favourable trading has been caused by the morning’s UK services PMI, which has greatly reassured Pound Sterling traders.
Among the optimistic economists responding to the news has been Samuel Tombs of Pantheon Macroeconomics, who says:
‘May’s services report increases our conviction that GDP growth will recover in Q2, following weather-related weakness in Q1.’
Forecast-Beating Rise in UK Services Activity Boosts GBP/CAD Exchange Rate
Pound Sterling (GBP) has risen against the Canadian Dollar (CAD) today, hitting its best exchange rate since early April 2018.
This strong performance was caused by a positive reaction to May’s services sector PMI, which rose by more than expected.
The shift from 52.8 points to 54 exceeded the anticipated 53 point reading and means that the sector is growing at a faster pace.
Remaining cautious despite the rise, IHS Markit Chief Business Economist Chris Williamson said:
‘The improvement in service sector activity adds to evidence that the economy is on course to rebound in the second quarter but, like the earlier manufacturing and construction surveys, raises questions about the outlook.’
Mr Williamson was also reluctant to call this a strong sign that the Bank of England (BoE) could now raise interest rates, saying:
‘The signs of economic growth rebounding in the second quarter will likely up the odds of the BoE hiking interest rates again in coming months, likely August, but with the forward looking indicators suggesting that the economy could relapse, a rate rise is by no means assured.’
Gloomy IMF Forecast Softens Canadian Dollar to Pound (CAD/GBP) Exchange Rate
Canadian Dollar (CAD) traders have been disappointed by recent economic forecasts, which have led to the currency falling against the stronger Pound (GBP).
The latest negative factor has been the International Monetary Fund’s (IMF) assessment that the economy could slow on a range of risks.
Among these is the issue of competitiveness – the IMF believes that if Canada doesn’t lower its corporation tax then the more attractive US could steal companies and investment.
There are additional concerns that more management is needed to keep the housing market stable, with concerns that a property bubble has developed.
Perhaps worst of all, IMF analysts are predicting a Canadian growth slowdown in 2018 regardless, from 3% in 2017 to 2.1% this year.
GBP/CAD Forecast: Will Pound Sterling Rise Further on GDP Forecast?
For the rest of the week, Pound/Canadian Dollar (GBP/CAD) exchange rate movement may be triggered by speeches from Bank of England (BoE) policymakers and the publication of a GDP estimate.
First up, BoE officials Silvana Tenreyro and Ian McCafferty will be speaking on Wednesday, followed by Dave Ramsden on Thursday.
These policymakers range from neutral to hawkish in their outlook, which could mean that they will hint at tighter monetary policy later in 2018.
Economists are unsure about whether the BoE will risk raising interest rates this year, but if the speakers make it seem likely then Pound Sterling could appreciate.
Later, on Friday, the NIESR UK GDP estimate for the three months to the end of May will be published.
The preliminary figure is expected to print around 0.3%, which could cause late-week GBP/CAD exchange rate gains.
On the other side, the Canadian Dollar (CAD) could be weakened by an Ivey PMI decline on Wednesday but recover if Friday brings news of a rise in employment.