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Weekly Currency Forecast: GBP CAD Rate in for Losses if UK Services PMI Slides

April 3, 2017 - Written by James Fuller

The British Pound to Canadian Dollar exchange rate edged higher on Tuesday morning and neared its best weekly levels despite low demand for the Pound.

While prices of oil, Canada’s most lucrative commodity, rose on Tuesday due to speculation of lightening US oil inventories, the Canadian Dollar failed to capitalise due to a risk-averse market in forex markets this week.

[Previously updated 04/04/17]

In another negative sign for the UK economy March’s construction PMI slipped from 52.5 to 52.2, offering further evidence that domestic momentum is slowing.

However, as demand for the risk-sensitive Canadian Dollar remained limited the GBP CAD exchange rate continued to trend in a relatively narrow range at 1.6730.

[Previously updated 03/04/17]

UK domestic data today has been largely negative, with an initial Pound rise on last week’s falling current account deficit being gradually eroded by manufacturing PMI figures.

Crucially, the March figure fell from 54.5 to 54.20 instead of rising to 55.1, which progressively weakened daily optimism about GBP.

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Sterling’s gains against the Canadian Dollar have instead come from greater CAD weakness, as well as an apparent resolution of the Gibraltar situation.

Fears emerged last week that the UK could struggle in EU negotiations due to Spanish contentions over Gibraltar, with some outlets even implying that war was on the cards.

Promptly defusing the situation has been Prime Minister Theresa May;

‘ What we are doing with all European countries in the European Union is sitting down and talking to them. We are going to talk to them about the best possible deal for the United Kingdom and for those countries, Spain included. It’s definitely “jaw-jaw”’.


GBP CAD Rate Predicted to Slide if UK Services Figure Drops



Today’s Pound damage from the manufacturing PMI may not be the last dealt this week, with Tuesday and Wednesday bringing construction and services figures.

Construction is predicted to fall fractionally from 52.5 to 52.4, but the more impactful services figure has a rise from 53.3 to 53.5 predicted.

Outside of this direct news, the Pound could also be moved by an incoming speech from Bank of England (BoE) official Gertjan Vlieghe, due Wednesday. Vlieghe previously voted to freeze UK interest rates, so may unsettle GBP traders with dovish comments.

Canadian Dollar Drops despite Manufacturing Rise



Contributing another PMI result today has been the Canadian RBC manufacturing variant for March. This has risen from 54.7 to 55.5, something that has ultimately failed to enable CAD gains.

More impactful has been the price of crude oil, which has shown signs of falling prices after last week’s consistent gains.

Additional news has seen the Bank of Canada (BOC) release its business outlook survey. This has indicated rising uncertainty about US policy changes and forecasts of minimal inflation growth.

CAD Shifts Likely on Jobs Data This Week



There are a few, high-impact Canadian announcements due this week, starting with Tuesday’s February trade balance figures. On the month, a surplus contraction is forecast.

The other main news will be Friday’s employment figures for March. Predictions have been pessimistic with a rise in unemployment from 6.6% to 6.7%.

The last CA data of the week will cover the Ivey PMI, which is forecast to show growing activity.
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