Mixed Canadian Employment Figures Fail to Boost GBP/CAD Exchange Rate
UPDATE: October’s Canadian labour market data failed to encourage confidence in the Canadian Dollar (CAD), even though the unemployment rate unexpectedly dipped from 5.9% to 5.8%.
As this improvement was driven by a decline in the participation rate, meaning that fewer Canadians are now active within the labour market, CAD exchange rates remained under pressure.
A surprise weakening in hourly earnings also dented confidence in the economic outlook, although this was not enough to shore up the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate ahead of the weekend.
Solid UK Construction Data Fails to Boost Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
A better-than-expected UK construction PMI was not enough to give Pound Sterling (GBP) a fresh boost ahead of the weekend.
Although the PMI unexpectedly strengthened from 52.1 to 53.2 in October GBP exchange rates still lost some of their earlier momentum on Friday morning.
As the construction sector only accounts for a fairly small percentage of the UK gross domestic product the impact of the data proved limited.
The report also highlighted the weaker outlook of the sector, raising concerns that the economy is likely to come under greater pressure over the course of the fourth quarter as Brexit uncertainty mounts.
This left the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate lacking in momentum this morning as the impact of the Bank of England’s (BoE) latest commentary faded.
Oil Price Slump Weighs Heavily on Canadian Dollar (CAD) Exchange Rates
While oil prices began to stage a recovery today this was not enough to give the Canadian Dollar (CAD) any significant boost against its rivals.
Investors remain wary of the outlook of the global oil market, with production continuing to rise even in the face of stagnant demand.
With Brent crude looking set to remain below the psychologically important US$80 per barrel mark for some time to come the potential of the commodity-correlated Canadian Dollar appears limited.
Unless the impact of the US re-imposing sanctions on Iranian exports next week proves significant the price of oil is likely to remain under pressure, to the detriment of CAD exchange rates.
Stronger Canadian Jobs Data May Fuel Canadian Dollar Rally
The Canadian Dollar could find a rallying point this afternoon, however, if October’s jobs data proves encouraging.
Although no change is forecast for the unemployment rate any signs of labour market tightening may set CAD exchange rates on a fresh uptrend.
Focus will also fall on the latest hourly earnings data, which is expected to show a modest acceleration on the year.
Rising wages may encourage the Bank of Canada (BOC) to take a more optimistic view of the domestic outlook, increasing the odds of future interest rate hikes.
However, any decline in employment could drag on demand for the Canadian Dollar, especially if the day’s US labour market data proves bullish.
Pound (GBP) Exchange Rates Vulnerable to Weaker UK Services PMI
Looking ahead to next week, the GBP/CAD exchange rate could come under fresh pressure if the UK services PMI fails to impress.
With the service sector accounting for more than three quarters of the UK gross domestic product a weaker showing here would leave the Pound vulnerable to another bout of selling.
On the other hand, signs of resilience within the sector could encourage the Pound to return to a stronger footing.
If the service sector shrugs off increased Brexit-based uncertainty this would improve the odds of a more robust fourth quarter GDP reading, something which would give BoE policymakers greater cause for confidence.
Even so, as long as the UK and EU remain at odds over Brexit arrangements the upside potential of GBP exchange rates could prove limited.