The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate dived by around -0.55% on Wednesday afternoon.
After the Office for National Statistics (ONS) indicated that British production growth is at its weakest since the Second World War, the Pound slumped versus the majority of its most traded currency rivals.
The Canadian Dollar, meanwhile, strengthened as a result of crude prices edging higher. Additional ‘Loonie’ (CAD) appreciation is thanks to improvement in Canadian manufacturing output, although production remains in contraction territory.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.8712.
Pound Sterling (GBP) Exchange Rate Declines on Weak Productivity
In accordance with the ONS, the productivity of the British workforce remains below 2007 levels, making an ‘unprecedented absence’ of growth since World War Two. ‘If productivity has taken a significant lasting hit, it means that the economy has less potential to grow without generating inflationary pressures and that interest rates will need to rise at an earlier stage,’ said Howard Archer, economist at IHS Global Insight.
A slight improvement to British manufacturing has hindered the Pound’s declination, however. The Manufacturing PMI met with the median market forecast of a rise from 54.0 to 54.4 in March. Rob Dobson, senior economist at Markit, said: ‘The UK manufacturing sector has continued its bright start to 2015, with March seeing the headline PMI rise to an eight-month high.’
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate dropped to a low today of 1.8684.
Canadian Dollar (CAD) Exchange Rate Strengthens on Crude Prices
The RBC Canadian Manufacturing PMI improved from 48.7 to 48.9 in March which initiated a ‘Loonie’ surge, but the data is still considered weak as production remained below the 50 level which separates growth from contraction.
‘With a second consecutive reading below 50, the RBC PMI is signalling that Canada’s manufacturing sector continues to face headwinds,’ said Craig Wright, senior vice-president and chief economist, RBC. ‘We remain confident that as the US economy continues to strengthen and the Canadian Dollar becomes more competitive, there will be an uptick in exports, a good sign for manufacturers – we need some time to see this materialize.’
Rising oil prices also aided the ‘Loonie’ upswing. The price increase is as a result of Iran’s nuclear talks dragging on. ‘A lot of people were expecting the deal to be done overnight and Iran to be pumping a million barrels tomorrow. That’s not going to be the case,’ said Amrita Sen, chief oil analyst at Energy Aspects.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast to Hold Losses
With sentiment towards the UK cooling amid political uncertainties, and with crude prices showing no sign of an immediate return to the downside, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is likely to hold losses for the remainder of the European session.
Thursday should see heightened GBP/CAD volatility with British construction data due for publication.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate reached a high of 1.8851.
