The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate weakened later on Wednesday as oil prices inched higher.
Earlier the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trading steadily as it continued to recover from Tuesday’s sharp decline as oil prices fell below the $50 a barrel level for the first time since May 2009.
On Tuesday, the Pound had weakened sharply against the Canadian Dollar and most other major peers after the latest Markit/CIPS UK services Purchasing Managers Index (PMI) showed that activity in the service sector fell to its lowest level since mid-2013.
The weaker than forecast services report added to a disappointing construction PMI released on Monday and last week’s manufacturing PMI report which came in below expectations.
The string of disappointing data releases increased speculation that the Bank of England will choose to refrain from raising interest rates anytime soon and as such, the Pound weakened sharply.
Sterling managed to rally against the Canadian Dollar however as the ‘Loonie’ remains under considerable pressure from the strength of the US economy and the continuing drop in oil prices. As oil is Canada’s most exported commodity the sharp decline in prices has weighed heavily upon the currency.
GBP/CAD Exchange Rate at 1.791
Today the price of oil fell below $50 per barrel on speculation that the US will increase its inventories and exacerbate the glut in global supply, which has forced prices down to a five-year low.
‘It’s fallen below $50, wow. The fall continues. All in all, there are very few factors that would support the likelihood of a bounce from this level,’ said Mark Keenan, the head of commodities research at Societe Generale SA.
Also weighing upon the Canadian Dollar is speculation that the Canadian economy is losing pace with the US due to the oil slump.
Investment in oil and gas accounts for roughly one-third of residential investment in Canada and economists are expecting to see a double digit decline in that type of spending over the coming year.
Economists have also reduced their growth expectations for 2015 and now see growth at 2.2% this year compared with 3.1% in the USA.
The Pound Sterling to Canadian Dollar exchange rate is likely to see movement later in the session due to the release of Canadian balance of trade and Ivey PMI data.
