Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Benefits as UK Service Sector Strengthens

Better-than-Forecast UK Services PMI Shores up Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate

UPDATE: As June’s UK services PMI rounded off a solid hat-trick of data the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate strengthened.

The index rose from 54 to 55.1 on the month, signalling that the sector enjoyed a robust level of expansion at the end of the second quarter.

With confidence in the underlying health of the UK economy boosted Pound Sterling (GBP) was encouraged to push higher as the odds of an August Bank of England (BoE) interest rate hike picked up – with GBP/CAD currently up 0.2%.

Bullish Canadian Manufacturing Weighs Down Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate

UPDATE: A sharp increase in the latest Canadian manufacturing PMI set the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate on a weaker footing.

As the index picked up from 56.2 to 57.1 this encouraged investors to pile into the Canadian Dollar (CAD) on Tuesday afternoon.

With the manufacturing sector continuing to demonstrate robust growth in spite of an increasing sense of global trade uncertainty, confidence in the outlook of the Canadian economy has improved.

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Pushes Higher as UK Construction Strengthens

A surprise uptick in June’s UK construction PMI offered a boost to the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate.

Markets were encouraged to find that the construction sector had strengthened on the month, with new orders rising at their fastest pace since May 2017.

However, as construction only accounts for a small percentage of the UK economic activity the stronger showing was not enough to encourage any great surge for Sterling (GBP) demand.

With the UK and EU still at odds over key Brexit issues the wider economic outlook does not appear overly positive, leaving the Pound vulnerable to renewed downside pressure.

Trade Worries Weigh Heavily on Canadian Dollar (CAD) Exchange Rates

Mounting global trade tensions helped to further shore up the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate.

As the Trump administration looks set to pursue more protectionist trade policies, the appeal of the risk-sensitive Canadian Dollar (CAD) has diminished.

There are concerns that NAFTA renegotiation talks could turn increasingly belligerent; something which could take a significant toll on the Canadian economy.

If the US imposes fresh tariffs on Canada this is likely to discourage the Bank of Canada (BoC) from raising interest rates again in the coming months.

Robust UK Services PMI to Shore up GBP/CAD Exchange Rate

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could see solid gains if Wednesday’s UK services PMI also impresses.

As the service sector remains the main engine of UK growth an uptick in June’s index would give the Pound a strong rallying point.

However, a softening in sector growth could leave GBP exchange rates on a weaker footing, undermining confidence in the domestic outlook.

Focus will also fall on the latest developments surrounding Brexit this week, with markets hoping for some sign of greater unity from Theresa May’s cabinet.

A continued lack of progress towards a meaningful deal, though, could weigh heavily on the appeal of Pound Sterling.

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Volatility Forecast on Canadian Employment Data

Friday’s Canadian employment data could see the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate falling back once again.

Any signs that the labour market is continuing to tighten may encourage investors to pile back into the Canadian Dollar, particularly if the participation rate rises as forecast.

Even though the BOC is likely to remain wary in the face of increased global market tensions, evidence of domestic strength could still boost CAD exchange rates.

However, if wage growth shows evidence of faltering the mood towards the Canadian Dollar is likely to sour further.

Unless the US backs down from the prospect of a trade war with its partners, the downside potential of the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate looks limited.

Hannah Wilson

Contact Hannah Wilson