GBP/CAD: Pound Weakens Amid UK Manufacturing Contraction

GBP/CAD is trading slightly lower on Monday. Currently, the pair is fluctuating around 1.7146, down 0.05% as of 10:27 AM UTC.

The pound is under increased pressure after IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) data showed that British factories cut the most jobs since 2012. As for the index itself, it fell to 48.9 in November from 49.6 in October, while analysts anticipated a worse reading at 48.3.

The 50 level divides growth from contraction, and the UK manufacturing PMI has maintained below 50 points for the seventh month in a row amid Brexit uncertainty. The markets are now waiting for the national election scheduled for December 12.

IHS Markit economist Rob Dobson commented:

“November saw UK manufacturers squeezed between a rock and hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election.”

Last month, UK factories reduced stocks at the fastest rate since June last year while cutting the most jobs since 2012, with the PMI’s employment sub-index dropping to 46.8 from 47.1.

Manufacturing accounts for about 10% of the UK’s gross domestic product (GDP).

Earlier today, the Confederation of British Industry and Make UK cut their forecasts for economic growth and manufacturing growth.

The CBI anticipates GDP growth of 1.3% this year and 1.2% next year, down from previous forecast figures of 1.4% and 1.5%, respectively. In 2021, the industry leader expects acceleration to 1.8% in 2021. The figures consider the best-case scenario in which UK Prime Minister Boris Johnson’s party manages to win the election and handle the Brexit.

Elsewhere, Make UK cut its forecast for manufacturing activity growth for 2020 to 0.3% from 0.6%, while keeping the GDP forecast unchanged at 1.4%.

Make UK CEO Stephen Phipson commented:

“Export orders have increased slightly this quarter, indicating greater confidence from foreign customers about purchasing UK goods as concerns about an end of year no-deal Brexit fade.”

The Loonie is supported by increasing oil prices and renewed US-China trade hopes despite the fact that US President Donald Trump signed the Hong Kong bills. Oil prices are driven by China’s factory activity data that beat forecasts.

Currencylive.com is a news site only and not a currency trading platform.

Currencylive.com is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.