Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Slides despite Canada’s Flat Economic Growth

October 1, 2019 - Written by John Cameron

STORY LINK Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Slides despite Canada’s Flat Economic Growth

Pound Canadian Dollar (GBP/CAD) Exchange Rate Falls despite Stagnant Canada GDP

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped and the pairing is currently trading at around CA$1.6240.

The Canadian Dollar edged up despite data revealing Canada’s GDP growth for July unexpectedly remained flat.

The data comes in the midst of the Canadian national election where economic issues have been at the forefront of the campaigns.

Statistics Canada revealed that oil and gas extraction suffered its largest monthly fall in a decade thanks to a shutdown of some offshore facilities for maintenance issues.

The agency also revealed that goods-producing industries slumped by -0.7%.

However, this could do little to stop the ‘Loonie’ rising against the Pound.

Sterling was left under pressure following reports suggesting that despite Brexit preparations at Dover, the port’s chief executive has said in the case of a no-deal Brexit, it expects to see a £1bn a week drop in trade.

Sterling (GBP) Falls despite Renewed Brexit Optimism

Sterling steadied on Tuesday morning as Prime Minister Boris Johnson was expected to present his proposals for a new Brexit agreement.

The Pound edged up on renewed Brexit optimism as the proposals are expected to include plans to remove the highly debated Irish backstop.

Meanwhile, UK manufacturing edged up to a four-month high in September as Brexit preparations within the sector restart.

While manufacturing edged up to 48.3 from August’s six-and-a-half year low, the headline index has remained below the neutral 50 mark for five successive months.

The ongoing weakness within the sector filtered through to the labour market, causing staffing levels to plummet at the fastest rate since February 2013.

This likely left the Pound under pressure, causing the pairing to slump in the afternoon.

Commenting on this morning’s data, Director at IHS Markit, Rob Dobson stated:

‘The UK manufacturing downturn continued in September, adding to signs that the sector may be sliding into a recession.

‘The shroud of uncertainty also weighed on the manufacturers’ confidence, which remained at one of its lowest ebbs in the survey history. These headwinds all ensure that manufacturing will likely remain a drag on UK economic growth during the months ahead.’

Canadian Dollar (CAD) Rises as Oil Prices Rebound

The Canadian Dollar edged up against Sterling on Tuesday afternoon despite a rebound in oil prices suggesting markets were not as concerned about supply shortages.

The oil-sensitive ‘Loonie’ rose as reports revealed output from the world’s largest oil producers fell during Q3.

However, news Saudi Aramco restored full oil production to levels seen before attacks on its facilities weighed on prices on Monday.

Commenting on this, Oil brokerage PVM’s Tamas Verga noted:

‘Although oil has been given every opportunity to jump well above $70 per barrel due to geopolitical events, the fact it did not is telling.

‘It suggests that the market is not concerned about eventual supply shortages but worried about global recession and possibly about supply surplus next year.’

Pound Canadian Dollar Outlook: Will Stronger Manufacturing Buoy CAD?

Looking ahead to this afternoon, the Canadian Dollar (CAD) could edge up against Sterling (GBP) following the release of Canada’s manufacturing PMI.

If September’s PMI unexpectedly edges out of contraction, the ‘Loonie’ could be provided with an upswing of support.

Meanwhile, if oil prices continue to rise the Pound Canadian Dollar (GBP/CAD) exchange rate is likely to slide.

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TAGS: Pound Canadian Dollar Forecasts