GBP/CAD Exchange Rate Rises Slightly as CA Jobs Data Disappoints
(Updated 16:30, 21/10/2021) The Pound Canadian Dollar (GBP/CAD) exchange rate is rising very slightly this afternoon as poor Canadian employment data dampens CAD trading sentiment.
ADP employment change for the month of September was expected to report 51K new jobs, but instead revealed that only 9.6K had been created – significantly fewer than last month. Jobs were mainly lost in leisure and hospitality (-32.4K) and education and healthcare (-12.8K).
The fall in job creation comes as Ontario seeks to reduce barriers for job-seeking immigrants, proposing new legislation that would reduce duplicate tests for language proficiency, eliminate Canadian work experience requirements where they are unnecessary and allow applicants to register faster in their regulated professions during times of emergency.
Provincial government hopes the move will ease labour shortages – roughly 300,000 jobs were unfulfilled this summer, costing the government billions in lost productivity.
Original article continues below:
Pound Canadian Dollar Exchange Rate Fluctuates over Rate Hike Speculation
The Pound Canadian Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as investors digest yesterday’s inflation figures.
A lower-than-expected inflation rate in the UK has cast doubt over Bank of England (BoE) rate hike expectations, while rising inflation in Canada puts pressure on the central bank to tighten monetary policy.
At the time of writing, the Pound Canadian Dollar exchange rate is trading at C$1.7031, virtually unchanged from today’s opening levels.
Pound (GBP) Trades Mixed on Rate Hike Uncertainty
The Pound (GBP) is trading in a mixed range today as uncertainty over the next BoE interest rate hike weighs upon trading sentiment.
According to economists at OCBC Bank:
‘The GBP may struggle should the UK CPI miss turn into a catalyst for the market to turn more sane over expected BoE rate hikes.’
Opinion is divided, as the majority believe that September’s fall in inflation is temporary: a result of skewed data as the effect of the ‘eat out to help out’ scheme dropped out of last month’s calculations.
Various BoE officials are against an imminent rate hike regardless of inflation, however – the MPC’s Catherine Mann and Silvana Tenreyro are of the opinion that the UK’s economic recovery remains uncertain and an early rate hike could be ‘self-defeating’.
Capping Sterling losses, public sector borrowing appears to be easing, according to new data this morning. Government borrowing fell to £21.8bn in September, a drop of around £7bn compared with September 2020 – indicating an improved fiscal outlook ahead of next week’s budget.
Canadian Dollar (CAD) Firms despite Higher-Than-Expected Inflation
The Canadian Dollar (CAD) is climbing against the majority of its peers, as high inflation for the month of September fans sooner-than-expected rate hike bets from the Bank of Canada (BoC).
The cost of just about everything that Statistics Canada measures was more expensive in September, raising headline inflation to its highest level since 2003. The majority of upward pressure came from costs of transportation, food and shelter.
Governor Tiff Macklem has indicated he would like to leave considerable stimulus in place because of relatively high jobless rates across Canada, which suggests that the economy remains weaker than it was before the crisis.
However, inflation may alter these plans. The BoC aims to keep CPI advancing at an annualized pace of about two per cent: making it hard to argue that inflation in excess of four per cent isn’t a serious threat.
Economists and investors are subsequently coming round to the idea that Canada’s benchmark interest rate may move higher in the first part of 2022. Such forecasts represent a challenge to the Bank of Canada, which last year insisted that it intends to leave its benchmark rate unchanged until at least the second half of the year.
According to James Marple, an economist at Toronto-Dominion Bank:
‘Lift off may not come as early as markets are currently pricing, but the risks are certainly moving to sooner rather than later.’
Pound Canadian Dollar Exchange Rate Forecast: CBI, Employment Data to Drive Movement?
Looking ahead, data from the Confederation of British Industry (CBI) could put some pressure on the Pound later today. Both industrial trends orders and business confidence are forecast to fall, with the latter likely to have a bigger impact.
Meanwhile, this afternoon’s employment change figures are forecast to show a continued recovery in Canada’s labour market, which could boost CAD- although retreating oil prices might weigh upon the commodity-linked ‘Loonie’.