GBP/CAD Exchange Rate Sinks as UK Markit Services Plummets in Contraction Territory
The Pound to Canadian Dollar (GBP/CAD) exchange rate fell by -0.6% after the UK’s final Markit Services PMI report revealed that Britain’s largest sector had contracted to a worse-than-expected 34.5. The pairing is currently trading around CA$1.739.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, was notably downbeat in his assessment, saying:
‘The services sector was sucked into a black hole and flung into the unknown by the forceful impact of the COVID-19 coronavirus, affecting every area of supply chains from transport to purchasing levels and job creation.’
Sterling performed well this week, but growing doubts over the UK’s economic outlook is beginning to weigh on the on the Pound to Canadian Dollar exchange rate.
Now that the UK is set to face another week of nationwide lockdown before Downing Street’s review of its effectiveness, we expected to see GBP lose some of its shine going into the weekend.
Furthermore, with the peak of the coronavirus toll still being predicted three weeks ahead, the GBP/CAD exchange rate will continue to be compromised.
Canadian Dollar (CAD) Rises as Oil Prices Surge on Price War Truce Hopes
The Canadian Dollar (CAD) received a boost from surging oil-prices after the West Texas Intermediate rallied to $22.52 per barrel on hopes of a Russia-Saudi truce over the oil price war.
The oil-sensitive ‘Loonie’ edged higher after US President Donald Trump said that he expects and hopes that the two nations – Russia and Saudi Arabia – would cut their supply by 10 million barrels. Mr Trump also added:
‘It’s very bad for Russia, it’s very bad for Saudi Arabia. I mean, it’s very bad for both. I think they’re going to make a deal.’
Stewart Glickman, an analyst at CFRA Research, was more sceptical, however, commenting:
‘While a truce (if actually enacted) would be a positive [for oil prices], we believe the benefits from a likely modest reduction in global crude oil supply are still likely to be swamped by the decline in crude oil demand that we see today, courtesy of the coronavirus.’
Furthermore, analysts at Reuters have painted a bleak picture of the Canadian economy going forward, with Canada’s economy expected to be hit particularly hard by the coronavirus as a major exporter of commodities such as oil.
George Davis, the Chief Technical Strategist at Capital Markets, also predicted that the Canadian economy will ‘enter a recession in the first half of this year’. Consequently, we could see the Canadian Dollar’s gains being short-lived.
GBP/CAD Forecast: Could ‘Loonie’ Sink on Gloomy Business Outlook?
Canadian Dollar (CAD) investors will be looking ahead to Monday’s release of the Bank of Canada’s (BoC) business outlook survey. However, with the coronavirus set to send business moral spiralling downwards, we could see the ‘Loonie’ shed some of its gains.
Oil prices will continue to dominate Canadian Dollar traders’ attention, however, with any signs of prices tumbling further proving CAD-negative.
The GBP/CAD exchange rate will remain sensitive to ongoing coronavirus developments next week, with any indications of an increase in numbers dragging on the Pound as the UK’s economic outlook continues to darken.