November 26, 2020 - Written by Frank Davies
STORY LINK Pound Canadian Dollar (GBP/CAD) Exchange Rate Under Pressure as UK Car Production Slump Worsens
Falling UK Car Production Fuels Pound Canadian Dollar (GBP/CAD) Exchange Rate Losses
The sharper-than-expected decline in October’s UK car production figure left the Pound to Canadian Dollar (GBP/CAD) exchange rate under pressure.
Worries over the health of the UK manufacturing sector picked up as car production plunged -18.2% on the year, highlighting the increasing challenges facing manufacturers.
This latest decline added to existing worries over the fourth quarter economic outlook, giving investors fresh reason to bet that the gross domestic product will turn negative once again.
While the government laid out its plans for the UK to return to a tier system in the wake of the second national lockdown this also failed to offer any encouragement to the Pound at this stage.
With all signs increasingly pointing towards an imminent double-dip recession there seemed little reason to favour the Pound over its rivals.
Dip in Brent Crude Prices Fails to Dent Canadian Dollar Support
Although Brent crude saw a -1.8% decline on the day’s opening levels on Thursday this was not enough to drag the Canadian Dollar lower across the board.
With oil prices still trending in the region of their recent high, having reaching levels not seen since early March, negative pressure on the commodity-correlated currency proved limited.
Investors also largely shrugged off a weaker-than-expected September average weekly earnings figure.
Although earnings growth eased from 7.5% to 6.9% on the year in September this failed to put any particular dampener on CAD exchange rates at this stage.
The mood towards the Canadian Dollar could pick up further ahead of the weekend if September’s Canadian budget balance shows a narrowed deficit as forecast.
Evidence that the country’s fiscal health improved at the end of the third quarter may give CAD exchange rates a fresh boost, limiting worries over the economic outlook.
Softer Nationwide Housing Price Index Forecast to Weigh on GBP Exchange Rates
On the other hand, the Pound may see limited support on Friday unless the Nationwide housing price index delivers a surprise improvement.
Unless the housing market can demonstrate another solid month of growth this month the GBP/CAD exchange rate could shed further ground.
Any indication that economic momentum slowed this month, in response to tightened Covid-19 restrictions, would add to bets that a fourth quarter GDP contraction is imminent.
Anything short of an upside surprise from the index could see the Pound losing fresh ground across the board ahead of the weekend.
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TAGS: Pound Canadian Dollar Forecasts