GBP/USD Exchange Rate Firming, GBP/CAD Bearish Following Surprisingly Upbeat Canadian PMI
The Pound has been trending lower versus the Canadian Dollar (GBP/CAD) on Monday as a strong Canadian Ivey Purchasing Managers Index (PMI) supported the ‘Loonie’. Meanwhile, the Pound to US Dollar (GBP/USD) exchange rate has enjoyed gains on Monday as the ‘Buck’ saw losses from the debate surrounding US interest rate hikes.
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The US Dollar rallied last week after the US Unemployment Rate dropped to 5.9% – a six-year low. However, with a lack of US domestic data published on Monday, markets have readjusted from last week’s rapid US Dollar gain.
Forex expert Fabian Eliasson commented: ‘[For the US Dollar] it’s a big journey in a few days, so I expect things to maybe slow down just a little bit until we get another catalyst. The Fed’s being fairly data dependent here. If things improve dramatically, it will be hard to defend not doing anything.’
Both the UK and US have been in close contention to raise interest rates before any of the other economies in the Group of Seven (G7) developed nations—a topic which has caused much market movement.
However, at present many investors are favouring the US Dollar after a run of favourable US data releases. Industry expert Valentin Marinov: ‘The market will want to reassess the speed with which the Fed will be moving. The Fed is moving towards the exit, will be hiking rates before long, and that should over the longer term, continue to support the Dollar.’
Meanwhile, despite rumours of a slowdown in the Canadian recovery, Monday has seen the Canadian Ivey Purchasing Managers Index rise to an unexpected 58.6 in September. Economists had initially forecast a rise from 50.9 to 52.5 so the surprisingly upbeat figure has offered the ‘Loonie’ exchange rate strength against other majors.
Purchasing activity increased in September to nearly the highest level in a year as a result of increased prices and stock. The Canadian Dollar has seen massive losses in recent months of more than 4.5% versus the US Dollar in the third quarter. However, the Canadian Dollar may be able to recoup some losses in the CAD to USD exchange rate following the PMI surge.
The UK released favourable New Car Registrations data on Monday as September’s figure rose by 5.6% on a yearly basis. Chief Executive of the Society of Motor Manufacturers and Traders Mike Hawes commented: ‘Demand for the new 64-plate has been boosted by intensifying confidence in the UK economy.’
Pound to US Dollar (GBP/USD) and Canadian Dollar (GBP/CAD) Exchange Rate Forecast
In terms of data releases this week, Tuesday’s UK Gross Domestic Product Estimate, which will indicate the level of economic activity in the UK. UK Industrial and Manufacturing Production figures will also be released, followed by US Consumer Credit numbers.
Canadian Housing Starts figures will be published on Wednesday as well as US Mortgage Applications and the Federal Reserve’s September Meeting Minutes. The Bank of England (BoE) will announce their latest interest rate decision on Thursday, whilst Friday will see the release of Canadian Net Change in Employment and Unemployment Rate stats.