GBP/CAD: Pound Recovers from Morning Losses

GBP/CAD has been quite volatile on Tuesday. The pair is currently trading at 1.7280, up 0.12% as of 10:13 AM UTC, after touching the daily low at 1.1718. The price is now fluctuating around a strong support level.

GBP/CAD crashed 1% yesterday

Yesterday, the pair crashed 1% after investors found out that UK Prime Minister Boris Johnson wouldn’t consider European leaders’ requirements to follow the single market standards in exchange for the free trade. Instead, the British PM is seeking a Canada-style agreement, in which Britain would decide its rules independently while still benefiting from the European market. Such an approach is not welcomed by the EU, and investors fear that the debate would lead to a hard Brexit.

The GBP/CAD continued to process this story up until this morning, but the pair bounced back after IHS Markit and CIPS released the UK construction purchasing managers’ index (PMI). The measure saw its strongest monthly increase in about two years this month. Thus, the building industry rose to 48.4 in January, from 44.4 in December, while analysts expected an increase to 46.6.

The survey showed that building companies were the most optimistic since April 2018. IHS Markit said:

“Anecdotal evidence suggested that greater clarity in relation to Brexit following the general election had a positive impact on demand, especially in the residential development category.”

The pound sterling increased on the construction PMI report and ignored Kantar’s data which suggested that British supermarkets had a slow start this year. The total grocery sales increased by a modest 0.3% in the 12 weeks to January 26. The “big four” supermarket companies saw annual sales declines.

Thus, Tesco, Walmart-owned Asda, and Morrisons saw sales drops of 0.9%, 2.2% and 3.0% respectively.

Sainsbury’s was the least worst performer among the big four, with sales falling by 0.6%.

Kantar said in its statement:

“While still declining, Sainsbury’s performance is improving, and online sales were a bright spot – growing by 7% year on year.”

Fraser McKevitt, Kantar’s head of retail and consumer insight, explained the reasons behind the slow start of the year:

“Many people start the year with good intentions and pledges to make healthier choices following the excesses of the festive period.”

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