The Pound to Canadian Dollar (GBP/CAD) exchange rate edged higher to 1.8877 on Monday after Canada’s disappointing employment report weakened the Loonie and reduced expectations of another Bank of Canada rate increase.
UK GDP and comments from Canadian central bank officials will provide the next tests.
Pound to Canadian Dollar (GBP/CAD): 1.887824 (+0.07%)
Euro to Canadian Dollar (EUR/CAD): 1.594977 (-0.12%)
Dollar to Canadian Dollar (USD/CAD): 1.42644 (+0.06%)
WEEKLY RECAP:
GBP/CAD recovered towards 1.89 on Friday after Canada’s unexpectedly weak employment report prompted investors to scale back bets on further Bank of Canada tightening.
Canadian employers shed 68,300 jobs in September, following a 41,700 decline in August, while unemployment increased to 6.5%.
The figures pushed the Canadian Dollar to an 18-month low against its US counterpart and reduced expectations for an October BoC rate increase.
Scotiabank economist Derek Holt questioned the unusually large decline in public-sector employment, particularly in education and healthcare, cautioning against placing too much weight on one survey.
ING strategist Francesco Pesole had already suggested that an October rate increase looked premature.
Pound Sterling has its own difficulties.
UK government borrowing costs remain elevated, with investors increasingly concerned about the credibility of the government’s fiscal plans ahead of the 28 October Budget.
MUFG expects the Bank of England to raise rates in November, although confidence in UK public finances remains an important consideration for Sterling.
Oil prices could offer the Canadian Dollar some protection against the latest employment disappointment, with crude markets still highly sensitive to Middle East developments.
Near-Term GBP/CAD Forecast: UK GDP and Bank of Canada Signals in Focus
Canadian markets are closed on Monday for Thanksgiving.
Bank of Canada Governor Tiff Macklem speaks on Wednesday, followed by Senior Deputy Governor Carolyn Rogers on Thursday. Investors will be watching for any indication that the jobs report has altered the central bank’s policy outlook.
For Pound Sterling, Thursday’s UK GDP figures are the main release. Economists expect a 0.1% monthly contraction in August, following July’s 0.4% expansion.
Manufacturing and industrial production figures are also due.
Canada publishes building permits on Wednesday, manufacturing and wholesale sales on Thursday, and housing starts on Friday.
If UK growth holds up and BoC officials acknowledge weaker employment conditions, GBP/CAD could challenge 1.9000.
Disappointing UK GDP or a firmer Canadian policy message would leave the pair vulnerable towards 1.8750.
Our currency coverage draws on live market data, official economic releases and published bank research.
