UK Construction PMI Fails to Accelerate GBP/CAD Exchange Rate Gains

September 2, 2016 - Written by Ben Hughes

STORY LINK UK Construction PMI Fails to Accelerate GBP/CAD Exchange Rate Gains

Construction PMI Helps Boost Outlook on UK Post-Brexit Economy, Pound Sterling (GBP) Exchange Rates Static

A recent UK manufacturing PMI shocked markets after showing a bullish leap back into growth territory, although Pound Sterling exchange rates remained unaffected, with GBP/CAD little changed.

The industry was expected to continue to decline, although the pace was forecast to slow, but instead the PMI jumped to a ten-month high of 53.3.

Markit’s UK construction PMI replicated the performance, charging from 45.9 to just within scraping distance of growth thanks to a score of 49.2.

Also boosting the Pound was a new report showing that business confidence in the UK had recovered from its post-Brexit slumped, although at 109.7 the measure remains below its pre-referendum score of 112.6.

Canadian Dollar (CAD) Weakens as Poll Indicates Long Wait for Interest Rate Hike

The Bank of Canada (BOC) will wait until the first quarter of 2018 before raising interest rates, according to a new poll that has weakened the Canadian Dollar.

The survey, conducted by Reuters, has seen 35 economists push back their forecasts for monetary tightening from earlier estimates of a July 2017 hike.

Investors have been waiting for another interest rate increase since late 2010, so the prospect of potentially another 18 months of low interest rates is weighing on CAD.

Crude oil prices were advancing, although this was of little help to the Canadian Dollar due to the fact that they remained around three-week lows.

Pound Sterling (GBP) Forecast: Can Services PMI Complete UK Trifecta of Bullish Readings?

With no data left for release on Friday, markets turned their attention to the key services PMI due for release on Monday.

Accounting for around 80% of UK economic output, the services index is the most influential of the four Markit PMIs.

Forecasts are for a rise from 47.4 to the neutral 50 mark, although given the over-performance of the manufacturing and construction indices there would seem to be a strong chance that the services index will land firmly in growth territory.

Canadian Dollar (CAD) Threatened by US Rate Hike Bets despite Scheduled Canadian Trade Data

High profile US data today will prove far more influential for the Canadian Dollar than domestic data, although movement could still come from the international merchandise trade figure.

Canadian trade is currently deep in deficit, so the forecast improvement to a -CA$3.2 billion shortfall may not do much for CAD sentiment.

More likely to move the Canadian Dollar is the day’s US data; the non-farm payrolls and unemployment rate reports.

If these boost the US Dollar, the Canadian Dollar will weaken due to the implications for cross-border trade.

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