A fresh drop in the price of oil has helped to push the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate up from a nine-month low today, despite a weaker UK Construction PMI.
Stronger Canadian GDP Pushed GBP/CAD Exchange Rate to Nine-Month Low
While the UK Manufacturing PMI proved decidedly disappointing yesterday, slumping from 52.9 to 50.8, Pound Sterling (GBP) nevertheless continued to regain ground. Despite the domestic manufacturing sector demonstrating far weaker growth than investors had expected, consolidation saw the Pound driven higher against rivals. Given that the recent bout of Sterling weakness has not had a chance to filter through into the wider economy at this juncture traders remained confident that the sector could pick up in coming months.
As weakness in the Chinese Manufacturing PMI increased hopes of additional economic stimulus a heightened atmosphere of risk appetite helped to buoy the price of oil and the Canadian Dollar (CAD). The ‘Loonie’ strengthened more substantially on the back of the latest raft of Canadian GDP data, however, as the fourth quarter showed more bullish growth than forecast to clock in at 0.8% rather than 0.0%. Consequently the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate slipped to a fresh nine-month low of 1.8687.
Canadian Dollar (CAD) Exchange Rate Falters on Prospect of Fresh Oil Inventory Increase
In spite of February’s Construction PMI also falling short of forecast to dip to 54.2 rather than climbing to 55.5, the GBP/CAD exchange rate has returned to an uptrend today. As the construction sector makes a more limited contribution to the UK’s GDP the impact of this figure has been relatively muted.
In tune with the persistently volatile nature of market sentiment, Brent crude has dipped back towards $36 per barrel this afternoon, denting the strength of the Canadian Dollar. Investors are concerned that the latest US crude inventory figure will show a greater increase in stockpiles, an unwelcome prospect as the global supply glut looks set to worsen.
GBP/CAD Exchange Rate Forecast: Weaker UK Services PMI to Dampen Sterling Demand
If US inventories are found to have risen further than forecast this afternoon the Canadian Dollar is expected to soften, slumping in tandem with the declining price of crude. Should the US Dollar (USD) continue to strengthen, and Friday’s Non-Farm Payrolls offer support to the idea of a nearer-term Fed interest rate hike, it is unlikely that the ‘Loonie’ will recover ahead of the weekend.
Tomorrow’s UK Services PMI could prompt the Pound to weaken, however, if growth within the sector also shows signs of slowing. Given the importance of services in driving the domestic economy a weaker showing here would deal a more serious blow to the GBP/CAD exchange rate.
Current GBP, CAD Exchange Rates
At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending higher at 1.8913, while the Canadian Dollar to Pound Sterling (CAD/GBP) pairing was slumped in the region of 0.5282.