GBP/CAD is declining on Friday, despite positive economic data released by the UK. Currently, the pair is trading at 1.7214, down 0.02% as of 9:30 AM UTC. The quotation hit a daily peak at 1.7248.
Yesterday, the pair tried to break the psychological level of 1.730, but it failed.
A few hours ago, IHS Markit released preliminary purchasing managers’ index (PMI) readings for the UK’s manufacturing and services sectors. Thus, British companies experience its best month in over a year, which suggest the election victory secured by Prime Minister Boris Johnson might bode well for the economy.
The services industry, which dominates the British gross domestic product (GDP), returned to the positive territory for the first time since August. According to preliminary results, the indicator rose this month to 52.9 from 50.0, while analysts expected an increase to 51.0. The 50 mark separates growth from contraction.
Manufacturing PMI for January rose to 49.8, from 47.5 in December, while economists anticipated only a slight growth to 47.6.
The composite PMI, which merges both manufacturing and services indexes, increased this month to 52.4 from 49.3 in December, the highest since September 2018. Analysts polled by Reuters expected the indicator at 50.6.
Optimism in the services sector rose to the highest in nearly five years, reflecting similar results reported by the Confederation of British Industry (CBI) and Deloitte.
The positive sentiment has prompted investors to cool their expectations of an interest rate cut from the Bank of England, which should meet next week.
IHS Markit chief business economist Chris Williamson commented:
“It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait-and-see approach as they assess the performance of the economy in the post-Brexit environment.”
Previously, the Bank of England’s policymakers, including Governor Mark Carney, said that the central bank was ready to implement more stimulus to support the economy. However, the latest PMI data, along with positive labor market data and CBI’s confidence index across factories might be enough to convince the Monetary Policy Committee to hold the rates unchanged.
