GBP/CAD continues the bullish journey that started on Monday, though the pair has been quite volatile today. Currently, one British pound buys 1.7338, up 0.27% as of 11:22 AM UTC.
The Pound Sterling accelerated its growth after IHS Markit published the UK services purchasing managers’ index (PMI), which showed that the British economy continued to strengthen after the election won by Prime Minister Boris Johnson. The services PMI increased to 53.9 in January, up one point compared to the preliminary reading and up from 50.0 in December. Analysts polled by Reuters expected an increase to 52.9. The January performance is the strongest since September 2018.
IHS Markit maintained its economic outlook that points to quarterly growth of about 0.2% at the start of 2020.
The services PMI survey showed that new business in the industry grew in January at the fastest pace since June 2018.
Howard Archer, economist at EY ITEM Club, commented on the report:
“The survey fuels our belief that the economy could conceivably achieve GDP growth of 0.4% quarter-on-quarter in the first quarter of 2020. However, a concern for the economy is that the upside for business willingness to commit to investment and major projects may be limited by still significant concerns and uncertainties over the UK-EU relationship.”
The UK, which left the European bloc at the end of last month, has to reach consensus on a trade deal with European leaders. However, there is an ongoing debate between Johnson and EU officials.
The services PMI’s measure of business expectations increased to the highest level in five years.
The composite PMI, which merges the services and manufacturing industries, increased last month to 53.3 from December’s 49.3 and the preliminary January reading of 52.4, touching the highest level since September 2018.
The sterling was boosted by the services PMI and ignored the auto market data according to which new car registrations fell last month by 7.3% year on year, to 61,717.
The decline was driven by a 14% fall in private consumers’ car purchases.
Mike Hawes, CEO of Society of Motor Manufacturers and Traders (SMMT), which prepared the report, said:
“The new car market is a key driver of the UK’s overall economy, so another month of decline is unsettling. Consumer confidence is not returning to the market.”
