Pound to Canadian Dollar Exchange Rate Losses Limited as Canada Job Market Report Disappoints
UPDATE 14:45 BST: While fresh uncertainties about the future of UK-EU relations after the Brexit process knocked the Pound to Canadian Dollar (GBP/CAD) exchange rate from its best levels on Friday, the pair’s losses were limited.
Canada’s May jobs market report failed to meet market expectations, falling short of forecasts in most major prints.
Canada’s employment change figure unexpectedly contracted at -7.5k, while the nation’s participation rate unexpectedly slipped to 65.3%.
As Canada’s domestic support weakened, GBP/CAD had an easier time holding most of its weekly gains.
Pound to Canadian Dollar Exchange Rate (GBP/CAD) Climbs on Canadian Dollar Weakness and G7 Meeting Fears
Stronger-than-expected UK services data and supportive Bank of England (BoE) comments have helped the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate climb this week, as the Canadian Dollar (CAD) has seen broad selling on trade uncertainties.
Due to some limited Pound (GBP) strength and the Canadian Dollar’s weakness, GBP/CAD has gained from the week’s opening interbank level of 1.72 and on Friday is trending near a high of 1.74. This is the pair’s best interbank level in almost a month.
This week, global trade jitters have taken focus for Canadian Dollar investors again, following news that US President Donald Trump was planning to go ahead with controversial trade tariffs aimed at trading partners including Canada.
Investors have also been anxious about the bumpy renegotiations of the North American Free Trade Agreement (NAFTA). Concerns that the US President wishes to change to bilateral talks, or that talks could even collapse, have further limited demand for the Canadian Dollar.
Pound (GBP) Exchange Rates Supported by Data and Bank of England (BoE) Speculation
This week has not been a particularly good one for the Pound (GBP) overall, but the British currency has still registered gains against a weak Canadian Dollar (CAD) thanks to Markit’s better-than-forecast PMI results.
Following surprisingly strong manufacturing and construction PMI figures, Britain’s services PMI beat forecasts of 53 by rising from 52.8 to 54 when it was published on Tuesday.
No particularly notable UK data has been published since then, but Thursday’s comments from Bank of England (BoE) Deputy Governor Dave Ramsden slightly bolstered BoE bets and Pound demand further.
Ramsden argued that recent UK data was consistent with the bank’s view that the UK economic slowdown was temporary, and he signalled that the bank could hike UK interest rates as soon as August:
‘The labour market is still robust. I expect GDP growth to resume at a steady but unspectacular pace and demand to continue to rotate away from consumption and towards trade and investment.’
Canadian Dollar (CAD) Exchange Rates Tumble on Persistent Trade Jitters
While Canadian data has been largely solid, and the Bank of Canada (BoC) has signalled that it will hike Canadian interest rates at least once in the second half of the year, the Canadian Dollar (CAD) has nevertheless seen weak performance this week.
Market trade jitters have only worsened in recent sessions, as US President Donald Trump’s protectionist rhetoric against US trade partners flared up once again.
Trump has expressed disappointment with NAFTA renegotiations, as well as repeating his other issues on trade with Canada.
The Bank of Canada has also shown signs that it is becoming more anxious about the trade outlook again.
Traders are now concerned that the upcoming G7 summit in Canada will not be a smooth or friendly affair.
Pound to Canadian Dollar (GBP/CAD) Forecast: UK Data in Focus Next Week
After a slew of influential Canadian ecostats in the past week, next week’s less notable Canadian data is unlikely to inspire much movement in the Pound to Canadian Dollar (GBP/CAD) exchange rate.
Instead, Canadian Dollar (CAD) investors will focus on US trade developments involving Canada, as well as any news from the G7 summit.
Otherwise, the upcoming slew of UK data is likely to be the main driver of GBP/CAD trade in the coming sessions.
Monday will see the publication of Britain’s April trade balance results, followed by April unemployment on Tuesday, May inflation on Wednesday and May retail sales on Thursday.
GBP investors are hoping that Britain’s data will print strongly, and continue to hint that UK economic strength is improving. Stronger-than-expected UK inflation or retail sales would help the Pound to Canadian Dollar (GBP/CAD) exchange rate to climb next week.