The Pound to Canadian Dollar (GBP/CAD) exchange rate found itself losing traction today as disappointing retail sales from both the UK and Canada did nothing to support the exchange rate.
At the time of writing the pair are currently trading at around CA$1.7682.
Preliminary UK PMI’s Limit Sterling Losses
The Pound (GBP) suffered today as a steep decline in retail sales from the UK in January pushed the currency down.
The Office of National Statistics (ONS) reported that retail sales sank by 8.2% in January, far more than the 2.5% forecast.
ONS deputy national statistician for economic statistics Jonathan Athow, said:
‘The latest national lockdown led to a sharp monthly fall in January’s retail sales, with April 2020 the only month on record to see a bigger slump.’
‘However, the decrease seen this time was not as large as that of the first lockdown, as some stores have adapted to the current circumstances, with services such as click-and-collect helping to cushion the fall.’
The Pound’s losses were limited, however, by preliminary UK PMI data from the private sector, which although remained in contraction showed the softest decline in four months.
Chris Williamson, chief business economist at IHS Markit, commented on the data, saying:
‘The UK economy showed welcome signs of steadying in February after the severe slump seen in January.’
‘Although the data hint at a renewed contraction of the economy in the first quarter, business expectations for the year ahead improved to the highest for almost seven years, suggesting the economy is poised for recovery.’
Canadian Dollar (CAD) Muted as Retail Sales Decline
The Canadian Dollar was on the back foot today as retail sales figures from the country showed the first decrease in seven months in December of 2020.
As tighter lockdown restrictions were implemented in Canada to combat the second wave of the coronavirus pandemic retail sales hit a roadblock, missing forecasts and falling -3.4%.
However, the Canadian Dollar has found support in the weakness of its rival the US Dollar (USD) as a decrease in treasury yields and a risk-off mood allowed CAD to limit any major losses.
Despite a dip in oil prices, the Canadian Dollar has remained appealing.
Pound to Canadian Dollar Outlook: UK Lockdown Easing in Focus
The GBP/CAD exchange rate will be dictated by the UK’s potential lockdown easing next week. Prime Minister Boris Johnson is to set out his ‘roadmap’ on Monday 22nd to start the journey out of the third national lockdown.
If the UK government is optimistic over beginning to ease restrictions, the GBP/CAD exchange rate could be pushed higher.
Pound investors will also look to an unemployment data release from December on Tuesday, which if it beats forecasts would prove positive for Sterling.
The Canadian Dollar will be driven by strengthening oil prices and any coronavirus developments in Canada, with any further lockdown restrictions in the country adding pressure to the currency.