Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Drops despite Canadian Unemployment Rising from 43-Year Low

Pound Canadian Dollar (GBP/CAD) Exchange Rate Slides despite Worse-than-forecast Canadian Unemployment

UPDATE: This afternoon saw the Pound Canadian Dollar (GBP/CAD) exchange rate slide following the release of mixed Canadian data, with the pairing currently trading at an inter-bank rate of CA$1.7179.

The Canadian unemployment rate for January rose higher than expected, from 5.6% to 5.8%, despite the flurry of 66,800 new jobs last month due to a hiring surge in the private sector.

Despite unemployment pushed up from its previous 43-year low in December, January’s net change for employment rose far higher than the forecast figure of 8K to 66.8K.

January’s participation rate also performed above expectations, rising from 65.4% to 65.6%, which likely also caused the pairing to slide.

Pound Canadian Dollar (GBP/CAD) Exchange Rate: Global Risk Sentiment Drags Down CAD as Trump Causes Anxiety Spike

The Pound Canadian Dollar (GBP/CAD) exchange rate began to slip early this morning, before rising again, and is currently trading at an inter-bank rate of CA$1.7239.

News emerged that US President Donald Trump and Chinese President Xi Jinping did not have plans to meet prior to the March 1st deadline.

Larry Kudlow, White House Economic Advisor told reporters:

‘At some point the two presidents will meet, that is what Mr Trump has been saying. But that is off in the distance still at the moment.’

This has had the effect of heightening global risk sentiment and weighing down the risk-sensitive ‘Loonie’, with Trump threatening to increase US tariffs on Chinese imports if talks do not succeed before the cut-off date.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Rises as Global Risk Sentiment Increases

This further increased global tensions, and today’s fall in oil prices had the added effect of limiting Canadian Dollar strength against the Pound.

Earlier this morning saw the release of a KPMG and REC UK report on jobs which found permanent job placements had fallen for the first time in two-and-a-half-years, although starting salaries had been pushed up.

Vice Chair at KPMG, James Stewart commented on the data, stating:

‘With Brexit just days away now, it’s definitely a nervous time for recruiters. January marked the first fall in permanent staff appointments since the referendum and we’ve seen a sharp decline in the number of candidates entering the jobs market. This is pushing up starting salaries at historically strong rates.’

Today will see Theresa May meet with Irish leader Leo Varadkar for discussions on the Brexit withdrawal agreement.

This will take place after Varadkar meets with the main parties from Northern Ireland and could have an effect on Sterling sentiment.

Yesterday: Pound (GBP) Buoyed as Carney Talks up UK Economy

Thursday saw the Pound Canadian Dollar (GBP/CAD) exchange rate rally, climbing from CA$1.7051 to CA$1.7271 following the Bank of England’s (BoE) interest rate decision and a speech from Governor, Mark Carney.

The BoE held interest rates steady at 0.75%, and stuck with its message that if a Brexit deal is done, it will rise interest rates, which kept Sterling buoyed.

In stating that the bank is confident that if there is a soft Brexit, Carney sparked hopes that the economy would pick up.

Carney stated:

‘The fundamentals of the UK economy are sound. The financial sector is resilient. Corporate balance sheets are strong, and the labour market is tight.’

GBP/CAD Outlook: Will Increased Canadian Unemployment Weigh Down CAD?

As there is an absence of UK economic data releases today, the main catalyst for movement of Pound exchange rates will be Brexit.

The pairing could see a slide if there are signs that Theresa May will be unable to get the legally binding changes to the Brexit agreement in regard to the issue of the Irish backstop.

The pairing may rise this afternoon, as January’s Canadian unemployment figures are set to be released, with the forecast indicating that unemployment will increase to 5.7%.

Also due for release is the Canadian net change in employment, which could also cause Canadian Dollar sentiment to fall if this number is lower than forecast.

If this were to happen we can expect to see the Pound Canadian Dollar (GBP/CAD) exchange rate to slip later today.

Millie Empson

Contact Millie Empson