Pound to Canadian Dollar (CAD/GBP) softer as PMI data continues to weigh

The Pound to Canadian Dollar (GBP/CAD) exchange weakened on Tuesday afternoon following the release of weaker-than-expected UK manufacturing PMI data and as the Canadian currency received support from positive PPI data and improving sentiment towards riskier assets.

Early in the session Sterling had managed to recover most of the ground it lost on Monday following the release of the better-than-forecast Canadian GDP data. It looked on track to make a recovery and even looked close to making gains before Markit released its manufacturing PMI data.

The PMI showed that the UK manufacturing sector fell to 55.3 in March, its lowest level since July 2013 and was well below February’s level of 56.9. The data dented optimism regarding the UK economy as economists expected the figure to rise to 56.9. Despite that the manufacturing sector is still expanding well above the 50 level which splits expansion and contraction.

The Canadian Dollar took advantage of the report and advanced further in the afternoon following the release of a report which showed that producer prices increased more than forecast in February.

According to Statistics Canada, Manufacturing prices rose by 1% beating economist expectations for a figure of 0.8%. On a yearly basis they advanced by 1.8%, below expectations for 2%.

Energy and petroleum product prices jumped 2.4% in February, led by a 2.5% rise in gasoline and a 4.1 percent increase in diesel fuel. Excluding energy, the producer price index rose 0.8%.

The currency could push higher if US manufacturing data comes in softer than expected as investors will raise their bets that the Federal Reserve could maintain its easing programme for a longer period than previously though.

Yesterday’s comments by Federal Reserve governor Janet Yellen hinted at the positivity that more negative US data could see the Central Bank hold off on tapering the easing programme that provides riskier and emerging markets with millions of Dollars.