Pound Canadian Dollar Exchange Rate Dips as UK Manufacturing PMI Sinks Below Forecasts

GBP/CAD Exchange Rate Falls as Brexit Uncertainty Returns

The Pound Canadian Dollar (GBP/CAD) exchange rate dipped today, with the pairing currently trading around CA$1.715 after December’s UK Markit Manufacturing PMI fell below forecasts to 47.5 at its fastest fall since July 2012.

Rob Dobson, Director at IHS Markit, commented:

‘The UK manufacturing sector took a turn for the worse at the end of 2019. Output fell at the quickest pace in seven-and-a-half years as new order inflows decreased and Brexit safety stocks were reduced. With demand weak and confidence remaining subdued, input purchasing was pared back sharply and jobs cut for the ninth successive month.’

Meanwhile, British markets remain cautious ahead of the 31st January Brexit leaving date, with concerns continue to hold back the GBP/CAD exchange rate as the decisive day draws closer.

With Brexit risk set to weaken the UK economy in January, Pound traders are holding off on further news ahead of the January sign-off and the newly-implemented December 2020 deadline for the end of the UK-EU ‘transition period’.

Samuel Tombs, Chief UK Economist at Pantheon, commented:

‘We do not know the strength of Euroscepticism among the new intake of Conservative MPs. The stage is set, therefore, for Brexit risk to dampen the economy again in the second half of next year.’

CAD/GBP Exchange Rate Edges Higher on US-China Trade Deal Hopes

The Canadian Dollar (CAD) continued to benefit from news that a US-China ‘phase one’ trade deal could be signed-off by 15th January, according to US President Donald Trump.

Shehzad Qazi, Analyst at the economic observatory China Beige Book, was sceptical, however, saying:

‘The deal will ultimately be weighed in terms of how much it does to address structural issues like intellectual property and market access.

‘The push for financial decoupling and, of course, the larger technological competition are also all here to stay. Trump’s trade war may have been the opening salvo of a long drawn conflict.’

However, the trade-reliant Canadian economy has benefited from the news, with ‘Loonie’ traders becoming increasingly optimistic that a US-China trade deal could provide a boost to Canada’s economy in the New Year.

In Canadian economic news, today will see the publication of the Markit Manufacturing PMI figure for December, which is expected to rise from 51.4 to 51.9 and could potentially boost the CAD/GBP exchange rate.

GBP/CAD Outlook: US-China Trade Developments in Focus

Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s speech by Carolyn A. Wilkins, the Senior Deputy Governor at the Bank of Canada (BoC). Any dovish comments about the Canadian economy, however, would weaken the CAD/GBP exchange rate.

Sterling traders will be awaiting tomorrow’s publication of November’s UK Mortgage Approvals figure, which is expected to dip to 64.45 thousand.

US-China trade developments, however, will continue to drive the GBP/CAD exchange rate this week, with any signs of the two superpowers coming to a consensus on the ‘phase one’ trade deal boosting market appetite for the risk-sensitive ‘Loonie’.

David Moore

Contact David Moore