GBP/CAD Exchange Rate Eases, Brexit Uncertainty Weighs on UK Manufacturing Sector
The Pound Canadian Dollar (GBP/CAD) exchange rate fell by -0.3% today, with the pairing currently trading around CA$1.710 after the flash UK services PMI for November fell below forecasts to its worst reading since July 2016.
Sterling also fell after November’s flash UK Markit manufacturing PMI figure sank deeper into contraction territory at 48.3, with the industrial sector remaining subdued due to Brexit-related uncertainty and the upcoming general election on 12th December.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat in his assessment, saying:
‘With a General Election added to the Brexit mix of general uncertainty and delayed decision-making, it would be a brave commentator who would suggest the possibility of any Christmas cheer as we head into the last month of the year.’
🇬🇧Doesn't look too good for the UK economy right now! PMI composite has fallen further below 50 signalling a GDP contraction in Q4! #Brexit uncertainty
We expect Bank of England to deliver a cut in January! pic.twitter.com/FPqg7jP6EM
— Danske Bank Research (@Danske_Research) November 22, 2019
UK political developments have taken a backseat today, with markets now becoming increasingly jittery over Britain’s economic health following today’s flash PMI releases.
However, with the Conservatives still maintaining their lead in the opinion polls after the Labour Party released its manifesto yesterday, we could see Sterling begin to claw back its losses as a sense of political stability returns.
CAD/GBP Exchange Rate Improves, BoC Rate Cut Fears Ease as Monetary Policy is ‘About Right’
The Canadian Dollar (CAD) has continued to benefit against the Pound (GBP) following yesterday’s speech by Bank of Canada Governor Stephen Poloz, who suggested that the bank’s monetary policy is ‘about right’ in current conditions.
Issa Mazen, a Currency Strategist at TD Securities, commented:
‘We think Poloz’s fireside chat and his reference that monetary conditions are ‘about right’ is a notable one as far as the CAD is concerned. It suggests that there is no particular urgency for the [Bank of Canada] to ease [interest rates] soon.’
However, the ‘Loonie’s gains have been clipped by ongoing uncertainty around US-China trade talks, with markets becoming increasingly concerned that the trade-reliant Canadian economy could suffer if relations between the two superpowers continue to deteriorate.
In Canadian economic news, today will see the release of September’s Canadian retail sales figure, which is expected to remain subdued at -0.1%.
A surprise uplift in Canada’s retail sector ahead of Christmas, however, could boost market the CAD/GBP exchange rate.
GBP/CAD Outlook: Could Sterling Sink on Heightened UK Election Uncertainty?
Pound (GBP) investors will be looking ahead to next Monday’s release of November’s realised UK CBI Distributive Trade Survey, which will give some indication of the health Britain’s retail and wholesale distribution sector.
However, with forecasts being generally negative for the UK economy this year, we could see Sterling sink as further evidence is provided for its downturn.
Canadian Dollar (CAD) traders, meanwhile, will be awaiting Monday’s release of September’s Canadian wholesale sales figure for September, which is expected to improve from -1.2% to 0.3%
This could boost market confidence in the ‘Loonie’ as Canada’s economic performance continues to improve.
The GBP/CAD exchange rate will continue to be driven by political developments next week, with any signs of the Labour Party gaining ground in the polls likely to weaken Sterling as political uncertainty returns ahead of December’s election.