Canadian Manufacturing PMI Leaves the Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted
UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat this afternoon. This left the pairing trading at around C$1.6966.
The pairing was left flat following the release of better than expected Canadian manufacturing data. This allowed the ‘Loonie’ to rebound against Sterling.
Markit revealed the country’s manufacturing PMI hit a four-month high in June of 47.8, up from May’s 40.6.
Data showed production volumes fell by the weakest extent since the coronavirus downturn began in March.
Commenting on the latest PMI data, Markit’s Economics Director, Tim Moore noted:
‘The latest Canada Manufacturing PMI highlights a vastly improved situation in comparison to that seen over the previous three months. June data signalled that the overall downturn in output, order books and jobs eased to its least marked since the COVID-19 pandemic took hold.
‘Despite another improvement in their expectations for production during the year ahead, manufacturers continued to report highly subdued underlying demand in June, alongside widespread concerns about the global economic outlook.’
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Slides despite Rise in Oil Prices
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rallied by around 0.4% this morning. This left the pairing trading at around C$1.7014.
The Canadian Dollar struggled to make gains against the Pound today despite data showing oil prices nudged higher.
A sharp drop in oil stockpiles outweighed concerns over the spike in coronavirus infections in the United States. Added to this, a revived lockdown in California could slow the recovery in fuel demand.
According to Louise Dickson, oil markets analyst at Rystad Energy:
‘Typically a drop in inventories signals a positive development in demand or a negative move in supply. But as supply is fairly stable, the market assumes demand stands strong, despite the new COVID-19 infections and restrictions.
‘New lockdowns in California would have depressed the market any other day, but yesterday’s EIA inventory report balanced the bad news and prevailed.’
However, the ‘Loonie’ remained under pressure after the US saw its biggest one-day spike yesterday. New coronavirus cases jumped by nearly 50,000 on Wednesday, which capped any gains.
California rolled back attempts to reopen its economy, and ramped up social distancing and other measures.
This worried investors as the heavily populated US sun belt states are amongst the country’s largest oil consumers.
Pound (GBP) Rises Ahead of ‘Brexit Crunch Point’
Sterling was largely driven by a weaker US Dollar (USD) on Thursday, which allowed the currency to make gains against the ‘Loonie’.
Investors also assessed the likelihood of the UK signing a trade deal with the European Union by the end of 2020.
July is crucial for Sterling as by the end of the month, it will become clear whether or not London will walk away from Brussels with a deal.
Commenting on this, Stephen Gallo, European head of FX strategy at BMO noted:
‘The second to last week and the last week of July are going to be the extreme Brexit crunch point.
‘If there’s not movement by the week of 20th or the week of 27th, that may be the second wave of selling in Sterling.’
Sterling was also supported by the expectation the latest US jobs data will show the world’s largest economy added around three million jobs last month.
Pound Canadian Dollar Outlook: Canadian Manufacturing PMI in Focus
Looking ahead to this afternoon, the Canadian Dollar (CAD) could suffer further losses against the Pound (GBP) following the release of the latest PMI data.
If Canada’s manufacturing PMI does not rise as high as forecast in June, it will dampen sentiment in the ‘Loonie’.
Meanwhile, on Friday morning traders will be focused on the release of GfK’s UK consumer confidence statistics.
Data could reveal British consumers are becoming less cautious in June as coronavirus restrictions were eased. This could send the Pound Canadian Dollar (GBP/CAD) exchange rate higher at the end of the week.