Despite the UK Visible Trade Balance showing some improvement on Friday, Pound Sterling (GBP) has continued to downtrend against both the Canadian Dollar (CAD) and US Dollar (USD).
Pound Sterling (GBP) Remains Bearish despite Narrowed Trade Deficit
Rather dovish words from Chancellor of the Exchequer George Osborne saw the Pound (GBP) slump against many of the majors on Thursday. Contradicting the more optimistic tone of his Autumn Statement Osborne highlighted the ‘cocktail of threats’ that pose downside risks to the UK economy, emphasising the need for austerity measures.
Although today’s UK Visible Trade Balance revealed that the domestic trade deficit had narrowed in November from -11.1 billion to -10.6 billion Pounds this was not quite as positive as pundits had hoped to see. With the Bank of England (BoE) unlikely to consider raising interest rates in the near future due to weaker manufacturing and service sector growth, the outlook of Sterling has remained rather bearish ahead of the weekend.
Oil Recovers from Twelve-Year Low to Bolster Canadian Dollar (CAD) Exchange Rate
With Chinese stock market volatility having strongly encouraged risk aversion this week the Canadian Dollar (CAD) has seen some sharp declines. Yesterday’s Ivey Purchasing Managers Index proved disappointing for investors as domestic business confidence plunged far further than anticipated, falling from 63.6 to 49.9. Putting additional pressure on the commodity-correlated ‘Loonie’ Brent crude sank to a twelve-year low of slightly over $32 per barrel on Thursday, as rising geopolitical tensions in the Middle East and the prospect of reduced Chinese demand weighed on oil.
While the Canadian Unemployment Rate held steady at 7.1% this afternoon demand for the ‘Loonie’ was bolstered by a stronger-than-expected Net Change in Employment figure. 22,800 employees were added to the domestic economy in December, suggesting at least some degree of improvement in Canada’s economic prospects. Consequently the GBP/CAD exchange rate has remained on a persistent downtrend today.
US Dollar (USD) Shored up Today after Stronger-than-Expected Non-Farm Payrolls
The suspension of China’s circuit breaker system, which had ultimately caused more market turmoil than it eased, initially saw the US Dollar (USD) soften against rivals as it ceded some of the ground it had gained on the back of safe-haven demand. However, pundits were generally optimistic ahead of today’s Non-Farm Payrolls report, in large part due to the week’s stronger ADP Employment Change figure. Ultimately bettering forecasts, the December payrolls revealed that 292,000 rather than 200,000 new jobs had been created in the final month of 2015.
Wage growth was weaker than hoped for, however, so the odds of the Federal Open Market Committee (FOMC) opting to raise interest rates again sooner rather than later seemed diminished. Nevertheless, the GBP/USD pairing has continued to weaken as the ‘Greenback’ remains dominant.
Current GBP, CAD, USD Exchange Rates
At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was slumped around 2.0555, while the Pound Sterling to US Dollar (GBP/USD) pairing was trending lower at 1.4565. Meanwhile, the Canadian Dollar to US Dollar (CAD/USD) exchange rate is on a downtrend around 0.7081.