The Pound-Canadian Dollar rate could remain under pressure if Canadian retail sales rebound, while dovish BoE comments may add to Sterling’s downside.
The Pound to Canadian Dollar (GBP/CAD) exchange rate drifted lower on Wednesday, following the publication of a weaker-than-expected services PMI from the UK.
At the time of writing, the GBP/CAD exchange rate was trading at CA$1.8739. Down roughly 0.2% from the start of Wednesday’s session.
Pound to Canadian Dollar (GBP/CAD): 1.86728 (-0.51%)
Euro to Canadian Dollar (EUR/CAD): 1.605593 (-0.29%)
Dollar to Canadian Dollar (USD/CAD): 1.40959 (+0.21%)
DAILY RECAP:
The Pound (GBP) faced headwinds on Wednesday, as data pointed to an easing of growth in the UK’s vital services sector.
Preliminary PMI data for September reported activity in the services sector fell to a three-month low, with the index sliding from 52.5 to 51.7, against forecasts for a more modest decline to 52.
While the service sector remains in a state of expansion, the index showed that output growth is slowing as inflationary pressures continue to build.
While ongoing price pressures reinforced expectations that the Bank of England (BoE) will need to start tightening monetary policy in the near-term, the broad slowdown across the services sector highlighted the difficult balance the BoE faces in controlling inflation, while not choking off what little growth the UK economy is currently showing.
The Canadian Dollar (CAD) remained remarkably resilient on Wednesday, with the commodity-linked currency seemingly able to shrug off the recent pullback in global energy prices.
Brent crude – the global benchmark for oil prices – declined for a sixth consecutive session on Wednesday, to fall back to just below $99, its lowest level in two weeks.
The softening of oil prices comes amid fresh hopes for the reopening of the Strait of Hormuz, after US President Donald Trump described a meeting with Iranian envoys as ‘very productive’.
However, the subsequent decline in energy prices has so far been relatively modest, as Trump also used his speech at the United Nations General Assembly to suggest he could ‘ annihilate the Islamic Republic’.
Near-Term GBP/CAD Forecast: Rebound in Retail Sales to Lift the ‘Loonie’?
Turning to the second half of the week, in addition to ongoing oil price dynamics, the Pound to Canadian Dollar (CAD/USD) exchange rate will also be influenced by the publication of Canada’s latest retail sales data on Thursday.
While July’s finalised figures are expected to confirm a slump in consumer spending at the start of the third quarter, a potential rebound in sales growth last month could offer support to the ‘loonie’ on Thursday afternoon and offset any further pullback in oil prices
Meanwhile, GBP investors may look to a speech by BoE policymaker Swati Dhingra for fresh impetus on Thursday.
As one of the Monetary Policy Committee’s (MPC) most dovish members, could her remarks place some pressure on Sterling?
Our currency coverage draws on live market data, official economic releases and published bank research.
