Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate as UK Services PMI Jumps to a Four-Month High
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat this morning, leaving the pairing trading at around CA$1.6912.
The UK’s highly anticipated UK services PMI revealed the survey continued to improve after April’s record low.
The headline index jumped from May’s 29 to 47.1 in June as new orders fell at a much slower pace. Business expectations jumped to a four-month high, which offered support.
The survey showed that around 33% of those asked reported a fall in business last month, while 28% signalled an expansion.
There were also reports that the easing of lockdown restrictions had a favourable impact of the sector.
Commenting on this morning’s data, Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply said:
‘A cessation in some lockdown policies enabled the services sector to emerge tentatively from the shadows last month and reclaim some normality, with the PMI leaping to a four-month high.
‘Though the sector remained in overall contraction territory, the re-opening of businesses premises unclogged levels of dampened demand and created hope that the worst impact of the pandemic could be over. However, as consumers remain fairly cautious, tightening purse strings, the highest levels of business optimism in four months may be a little premature.
‘As the sector regains some momentum, employment levels amongst services personnel remain deeply concerning.’
Canadian Dollar (CAD) Flat as Covid-19 Cases Spook Oil Markets
The Canadian Dollar remained under pressure today as oil prices edged lower at the end of the week.
The resurgence of coronavirus cases around the world and the surge in the US sparked fears the recovery in oil demand will be stalled.
The increase in cases for the world’s largest oil consumer spooked markets, with cases increasing by 50,000 on Thursday. This set another record for the third day in a row.
In a note, ANZ Research wrote:
‘The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery.’
Markets will be closely monitoring demand as the United States celebrates its 4 July weekend as many Americans are expected to travel.
The note from ANZ Research added:
‘The recovery in gasoline demand will plateau until the U.S. economy improves.’
Sterling (GBP) Under Pressure as Firms Look to ‘Painful Choice’ of Redundancy
Meanwhile, this morning a survey revealed that British factories are planning to lay off workers. This is a warning sign for the country’s economy as it attempts to recover from the coronavirus crisis.
According to Make UK, around 46% of manufacturers are expecting to make redundancies over the next six months. This figure is up sharply from 25% in May.
Stephen Phipson, chief executive of Make UK noted:
‘Conditions are still very tough for many companies with disruption likely to continue for some time.
‘This has led some to reluctantly conclude that with demand unlikely to return for some time, if at all, they are moving to the painful choice of redundancy.’
Although, Sterling was offered some support after a separate survey showed British consumers were more optimistic.
GfK’s consumer confidence index edged up from -30 to -27, as confidence began to improve in June. This was the highest the index has been since the lockdown began.
Pound Canadian Dollar Outlook: Will Weak Oil Prices Send CAD Lower?
Looking ahead, the Canadian Dollar (CAD) could edge lower against the Pound (GBP) this afternoon if oil prices continue to fall.
If oil prices slump further as markets fret over the growing number of reported coronavirus cases in the United States, the ‘Loonie’ will slide.
Meanwhile, Sterling could start next week’s session stronger if June’s construction PMI impresses investors.
If June’s construction PMI shows the sector is showing signs of returning to growth, it will boost the British currency. This will leave the Pound Canadian Dollar (GBP/CAD) exchange rate trading higher at the start of the week.