The Pound to Canadian Dollar exchange rate softened on Thursday as the appeal of the ‘Loonie’ was bolstered by unexpectedly strong Chinese Services PMI and an improvement in the employment sector of Canada’s main trading partner, the US.
The Canadian Dollar was bolstered on Wednesday as a domestic manufacturing gauge showed stronger-than-anticipated expansion June. The ‘Loonie’ was able to consolidate these gains as China published impressive Services and Composite PMI figures.
In another sign that the government-imposed stimulus measures are having the desired effect, the Services PMI climbed from 50.7 to 53.1 and the Composite PMI rallied from 50.2 to 52.4.
In a statement issued with the figures, HSBC economist Hongbin Qu noted; ‘The HSBC China Services PMI headline index rose to 53.1 in June, the highest reading since March 2013. Both new and existing business indices rebounded, suggesting stronger economic momentum. The employment index also improved over the month, as increased economic activity lifted labour demand. The expansion in the service sector reinforces the recovery seen in the manufacturing sector.’
Sterling, meanwhile, had spent much of the week in an elevated position against its peers thanks to impressive UK Manufacturing and Construction figures.
However, Thursday’s Services PMI (the crowning jewel in the three industry measures) declined by more than expected.
Investors had harboured secret hopes that the gauge would smash expectations given that the other PMI’s had over performed, but the index actually edged from 58.6 in May to 57.7 in June.
This was certainly a strong result for the UK, and the nation still seems to be on track to post an impressive growth figure in the second quarter, but once you’ve got used to better-than-expected results, a disappointing figure can be tough to take.
Consequently, Sterling stumbled slightly against its currency counterparts.
The Pound to Canadian Dollar (GBP/CAD) exchange rate hit a low of 1.8216.
Later on Thursday a Canadian report showed that the nation’s merchandise trade deficit narrowed by more than expected in May.
The deficit narrowed to 152 million Canadian Dollars as exports climbed by 3.5% and imports increased by 1.6%.
The report elicited this response from economist Nick Exarhos; ‘Poloz has mentioned an export wedge he would like to see filled.’
The Canadian Dollar received further support during the North American session as the US released its highly anticipated US Non-Farm payrolls report.
Employment in the US enjoyed such an impressive rebound in June that the nation’s unemployment rate slid from 6.3% to 6.1%. Economists had expected no change in the jobless rate.
As Canada has such strong trade links with the US, this encouraging sign of improving economic performance was Canadian Dollar supportive.
A lack of UK and Canadian news may well limit movement in the Pound to Canadian Dollar (GBP/CAD) exchange rate tomorrow.