Tuesday opened with the Pound to Canadian Dollar exchange rate at a level of CA$ 1.6962; the pairing later closed daily trading at a higher level of CA$ 1.7021.
This appreciation was brought on by lingering hopes for a Brexit deal being secured by the November deadline, despite a lack of recent progress in negotiations.
GBP/CAD Exchange Rate Ticks Higher on Positive UK GDP Reception
The Pound (GBP) has firmed against the Canadian Dollar (CAD) today, trading at an exchange rate of CA$ 1.7042.
This is slightly higher than last week’s closing rate and is near the best GBP/CAD exchange rate seen since late September.
The headline news has been GDP data for August, covering the month itself and a 3-month average to the end of August.
The former figure has been disappointing, with 0.4% GDP growth in July giving way to a flat 0% figure in August.
More supportively, however, the 3-month average has printed at 0.7% instead of falling to 0.6% as some economists had forecast.
Taking the news as a positive sign, a Treasury official said:
‘We are building a stronger, fairer economy, and have made great progress repairing the public finances and helping more people into work.
‘Our debt is starting to fall, so we can spend less on debt repayments and invest more in public services, while keeping taxes as low as possible.
‘The economy continues to grow with retail, food and drink all performing well during the summer.’
Not everyone has responded so favourably to the data, however; John Hawksworth of PricewaterhouseCoopers has cautioned that:
‘The underlying trend is for moderate UK growth at a rate of around 1.5% per annum.
‘This is somewhat below its longer term trend rate of around 2% and reflects the continued drag on business investment in particular from Brexit-related uncertainty.’
There has been little GBP support from today’s other UK data – a greater-than-forecast slowdown in construction activity has been reported alongside a considerable expansion of the UK’s trade deficit.
Canadian Dollar to Pound (CAD/GBP) Exchange Rate Slides on Oil Industry Issues
On the other side of the currency pairing, the Canadian Dollar (CAD) has dipped against the Pound (GBP) because of ongoing problems associated with Canada’s crude oil industry.
Extracting and exporting the resource is a key component of the Canadian economy, but despite relatively easy-to-access reserves, transporting oil out of Canada remains problematic.
Limited pipeline infrastructure means that oil producers are turning to rail or road transport options, both of which have their drawbacks in terms of safety and time taken.
This effectively reduces Canada’s competitiveness with oil producers in the United States and over time can lead to losses across the sector.
Considering the issue that has been draining CAD trader confidence, Kent Fellows of the University of Calgary said:
‘It’s a storm that’s been brewing for a while.
‘The risks of spills are higher [by rail], but the fact that this stuff needs to get to market because people are buying it means it’ll search out the lowest-cost pathway.’
Pound to Canadian Dollar (GBP/CAD) Forecast: Will CA Building Permits Data Cause Pound Sterling Losses?
The next economic news to watch out for will come from Canada, in the form of the afternoon’s building permit stats for August.
These are expected to show a slight rise during the month, with a shift from -0.1% in July to 0.5%.
While a minor increase, such a result could still boost the CAD/GBP exchange rate given the positive implications for the Canadian construction sector.
More permits being granted suggests that there will be increased construction sector activity in the future, which will ultimately be beneficial in terms of job creation and economic growth.
Beyond this immediate data, the Pound could recover and rise against the Canadian Dollar when Bank of England (BoE) policymaker Gertjan Vlieghe speaks on Thursday.
Mr Vlieghe will be discussing the UK central bank’s monetary policy plans, so could cause a GBP/CAD exchange rate rally if he backs a 2019 interest rate hike.
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