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Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Slips as UK Construction PMI Slides into Contraction

March 4, 2019 - Written by John Cameron

Pound Canadian Dollar (GBP/CAD) Exchange Rate Slides as UK Construction Declines at Fastest Rate in 11 Months

The Pound Canadian Dollar (GBP/CAD) exchange rate slipped this afternoon, as Sterling was weighed down by worse-than-forecast cConstruction PMI data.

The pairing is currently trading at an inter-bank rate of CA$1.7579.

This morning, Sterling fellslipped following the release of the Markit Construction PMI, which slipped into contraction territory.

Data showed that construction activity declined for the first time in 11 months, as the index slipped to 49.5 in February.

Housing was the only category within the sector to register growth, as it expanded for the thirteenth month running.

However, this could not offset the contraction for commercial and civil engineering activity with the pace of contraction the steepest since March 2018.

Commenting on the data, Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply said:

‘Commercial and civil engineering activity was pushed into the red, as client uncertainty over placing new orders left its mark. This meant the relatively weak residential building sector was the best performer. However, with consumer confidence also waning, housing is likely to follow suit in the coming months.

‘[…]On the upside, input price inflation was not as strong compared to the last couple of years and employment creation was modestly maintained in spite of some companies placing a freeze on any new hires. In short, the foundations of the construction sector are crumbling under the weight of Brexit and businesses are switching to survival mode until the way forward is cleared.’

Pound Canadian Dollar (GBP/CAD) Exchange Rate Slips as Risk Appetite Increases

US-China optimism likely buoyed the Canadian Dollar (CAD) as reports emerged that the two countries could be close to reaching an agreement.

This likely aided the ‘Loonie’ during the session today as investors’ risk appetite increased.

It has been reported that a summit between US President Donald Trump and Chinese Premier, Xi Jinping could be as early as this month.

While a date has not yet been set for the summit, it is said that Beijing has reserved a ten-day window for a possible summit.

On Saturday, President Trump took to Twitter to announce he had requested that agricultural tariffs on US goods to be lifted, which sparked further optimism.

Donald Trump tweeted:

‘I have asked China to immediately remove all Tariffs on our agricultural products (including beef, pork, etc.) based on the fact that we are moving along nicely with Trade discussions and I did not increase their second traunch of Tariffs to 25% on March 1st. This is very important for our great farmers – and me!’

However, the ‘Loonie’ was likely still weighed down by Friday’s GDP data which showed that the economy narrowly escaped stagnation, growing by just 0.1% in Q4 2018.

Pound Canadian Dollar Outlook: Will the GBP/CAD Exchange Rate Slide as UK Services Contract?

The Pound (GBP) could rise against the Canadian Dollar (CAD) tomorrow following the release of the UK like-for-like retail sales.

If retail sales increase for the second month in a row as forecast, it could buoy Sterling.

Later in the session the UK Services PMI is due for release, which could cause Sterling to slide if it performs in line with market expectations.

The forecast suggests that the services sector is going to slide into contraction in February at 49.9, which would be the first time since July 2016 the index has slipped below the 50 mark.

Looking ahead to Wednesday, the Canadian Dollar could rise following the release of the Bank of Canada’s (BoC) interest rate decision and rate statement.

If the BoC holds rates steady at 1.75%, and their outlook for the ‘Loonie’ is hawkish, the Pound Canadian Dollar (GBP/CAD) exchange rate could slip.

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