The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate strengthened on Wednesday to hit a session high of 1.919.
The ‘Loonie’ declined as data released by the Richard Ivey School of Business showed that Business confidence in Canada fell sharply in January as falling oil prices negatively impacted upon the economy.
Canada’s Ivey Purchasing Managers Index (PMI) expanded at its slowest pace in close to four years in the first month of 2015, adding to concerns over the strength of the North American nation’s economic outlook.
The index fell to a reading of 45.4, from December’s number of 55.4. The decline was far sharper than economists had been expecting.
In comparison, the Pound found support from a UK Service sector PMI that showed that activity in the UK’s dominant sector increased more than expected in January. The data released by Markit/CIPS showed that the PMI rose to a reading of 57.2 last month, up from the figure of 55.8 recorded in December.
Economists had been forecasting for a figure of 56.3.
In a PMI, any figure above 50 indicates expansion whilst one below indicates contraction.
Oil Prices Fall
Oil prices fell again on Wednesday as a report out of the USA showed that crude oil supplies in the world’s largest economy grew more than expected last week and reached the highest levels in 80 years.
The report released by the US Energy Information Administration showed that US crude oil supplies increased by 6.3 million barrels in the week ending January 30 to a total of 413.1 million barrels. Economists had been forecasting for a rise of 3.7 million barrels.
‘US crude oil inventories are at the highest level for this time of year in at least the last 80 years,’ the EIA said in a statement released alongside the report.
Brent crude fell to $55 per barrel and crude oil fell to $50.3 per barrel.
Also dragging on oil prices was the release of softer data out of China, which suggests that demand for commodity is falling.
‘A steady stream of news regarding falling capital expenditure from the industry and a drop in US oil rigs in operation appears to be the spark. While sentiment appears to have shifted, volatility will remain high,’ said analysts from ANZ.
Market attention will now focus on Thursday’s Bank of England (BoE) interest rate decision and Canadian Balance of Trade Data.
