Pound Canadian Dollar (GBP/CAD) Exchange Rate Dips on Upbeat Canadian Jobs Data

GBP/CAD Exchange Rate Slumps on a Strengthening Canadian Dollar

(Updated 16:15, 07/01/2022) The Pound Canadian Dollar (GBP/CAD) exchange rate is sliding down this afternoon as Canada’s jobs report surprised to the upside. Meanwhile, Pound (GBP) trading is subdued by a lack of significant UK data.

Printing above expectations, Canada’s unemployment rate slid to 5.9% in December, rather than remaining at 6% as forecast. While only a marginal victory, CAD upside was extended as the number of new hires almost doubled the expected figure.

At the end of 2021, Canadian employment change figures reached 54.7K, driven by gains in the goods-producing sector. Full time employment rose by 0.8%, with the majority of the increase occurring among men of core working age.

Such is the response to the data that the subsequent release of a weaker-than-expected Ivey PMI seems to have had little effect on the markets.

The Ivey Purchasing Managers Index suggests business conditions in the country fell into contractionary territory last month: however, the seasonally adjusted version of the PMI index fell to 51.1, remaining in expansion territory.

Original article continues below:

Pound Canadian Dollar Exchange Rate Range-Bound as WTI Prices Climb

The Pound Canadian Dollar (GBP/CAD) exchange rate is trading in a narrow range this morning as both currencies enjoy modest tailwinds. A hawkish Bank of England (BoE) buoys the Pound (GBP), while rising oil prices support the ‘Loonie’.

At the time of writing, GBP/CAD is trading at A$1.7236, virtually unchanged from today’s opening levels.

Canadian Dollar (CAD) Supported by Oil Prices, Jobs Forecast

The Canadian Dollar (CAD) is trading up against the majority of its peers today as rising oil prices buoy the currency. Oil supply shortages raise the value of WTI crude: Libyan exports continue to falter and civil unrest in Kazakhstan is troublesome for central Asia production.

Also providing upside for the ‘Loonie’ is the expectation for an increase in December hiring. Although marginal, the forecast 27.5K new hires would indicate a recovering jobs market amidst ongoing Covid pressures.

Analysts at ING bank flag the risk of a negative reading today, which:

‘…would worsen a domestic economic story that is already facing the strains of tough containment measures. Disappointing employment data today may offer a reason for policymakers to sound more cautious on tightening given the Omicron spread.’

However, the bank concedes that ‘the Canadian economy (and the jobs market in particular) was in a very good place before Omicron hit, and any re-rating of Bank of Canada (BoC) expectations may be premature.’

Pound (GBP) Lacks Significant Data to Inspire Movement

The Pound (GBP) is trading in a mixed range this morning as a lack of significant data leaves the currency to trade on risk sentiment. Lending Sterling some support, Bank of England forward guidance is looking hawkish for the months ahead.

Economists observe that a 25bp hike is 80% priced for the 3 February meeting and the Bank Rate is priced at 1.00% for the August meeting, further speculating that the BoE might feel emboldened by the hawkish shift from the Federal Reserve.

Capping Pound gains, however, are continuing fears for the state of the NHS: in recent days, several NHS health officials have warned that a staffing crisis is impacting the quality of care the service can provide.

Investors are also listening for updates on the forecasted cost of living squeeze: the Financial Times reports that UK households are facing the biggest income squeeze in a generation, given extreme rises in household gas and electricity bills, large national insurance and income tax rises and the highest rate of general price increases for a decade.

GBP/CAD Exchange Rate Forecast: Canadian Jobs Data to Influence Trading?

Looking ahead, Canada’s jobs report later today is likely to be the main influence on the Pound Canadian Dollar exchange rate. If an increase in hires occurs as expected, CAD may enjoy additional tailwinds.

Meanwhile, Covid sentiment and other external factors could influence Pound exchange rates today, potentially exerting additional downside if NHS-related concerns escalate.

Olivia Evershed

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