Resilient UK Construction Fails to Lift Pound Canadian Dollar (GBP/CAD) Exchange Rate
The relative strength of the UK construction PMI failed to offer the Pound to Canadian Dollar (GBP/CAD) exchange rate any particular boost.
While the PMI remained firmly in expansion territory at 54.6 this still represented a slight slowdown on the month, leaving Pound Sterling (GBP) on the back foot.
As the construction sector only accounts for a small fraction of the UK gross domestic product investors saw limited reason to take encouragement from the PMI’s resilience.
On the other hand, the mood towards the Canadian Dollar (CAD) remained largely positive in the wake of the OPEC+ decision to leave its existing production cap in place.
After Saudi Arabia agreed not to increase its oil production capacity oil prices saw some solid gains, offering support to the commodity-correlated Canadian Dollar.
A better-than-expected narrowing of November’s trade deficit also offered a boost to CAD exchange rates, meanwhile.
Higher Unemployment Rate May Drive Canadian Dollar Reversal
Even so, the Canadian Dollar may struggle to hold onto its stronger footing heading into the weekend if December’s labour market data fails to impress.
Forecasts point towards the unemployment rate picking up from 8.5% to 8.6%, reflecting the pressure still coming to bear on the Canadian labour market.
If unemployment shows a fresh increase on the month this could leave the Canadian Dollar vulnerable to a fresh bout of selling pressure.
As long as investors see reason to doubt the resilience of the Canadian economic outlook the upside potential of CAD exchange rates should prove limited.
However, with the US Dollar (USD) looking vulnerable to weakness on the back of an underwhelming labour market report the Canadian Dollar could still benefit from any decline in its rival.
Heightened market risk appetite may well help to boost CAD exchange rates in the days ahead, even as anxiety over the spread of the latest wave of Covid-19 infections lingers.
Softer UK Gross Domestic Product Reading Set to Drive GBP Exchange Rate Losses
Renewed volatility could come to bear on the Pound next week, meanwhile, with the release of November’s set of UK trade, production and growth data.
Market focus looks set to fall on the gross domestic product figures in particular as bets over the possibility of a fourth quarter growth contraction continue.
If November’s monthly growth rate weakens as sharply as forecast this could see the Pound trending sharply lower across the board, with investors increasing the odds of a double-dip recession.
Unless the economy can demonstrate any significant signs of resilience in the face of the ongoing Covid-19 crisis any support for GBP exchange rates looks likely to prove muted at best.