cad-bank-notes - CAD

GBP/CAD is bouncing back on Tuesday after three bearish sessions in a row, during which the pair lost about 1.40%. Currently, one British pound buys 1.7065 Canadian dollars, up 0.46% as of 8:50 AM UTC.

The Pound: UK’s Building Industry Returns to Growth

The sterling started to show its teeth after IHS Markit published the UK construction purchasing managers’ index (PMI). The indicator rose to 52.6 last month from 48.4 in January, way higher than analysts’ expectations of modest growth to 48.8. The 50 mark separates growth from contraction, and Britain’s building sector reached the positive territory for the first time in about a year.

New orders surged last month to the highest level since December 2015, suggesting sustainable optimism in the market.

Some respondents of the PMI poll noted that contracts from the freshly announced High Speed 2 rail network, as well as other transport projects, have the potential to push infrastructure work higher. Others said that the construction recovery was impeded by the poor weather conditions of February.

It remains to be seen whether the construction sector’s rebound is sustainable given the recent coronavirus outbreak in Europe. IHS Markit stated that March data would consider the impact of the virus. Tim Moore, the economic director at the information provider, commented:

While construction order books have begun to recover in the opening part of 2020, the fly in the ointment is the uncertain impact of the coronavirus outbreak on UK economic growth prospects. A renewed slowdown could see domestic investment spending put back on hold and dampen the outlook for the UK construction sector.”

The construction PMI showed that British companies were not as optimistic about the growth potential as in January. However, their confidence is much more solid than in the second half of 2019.

Elsewhere, the Loonie hasn’t been moved by any fundamentals coming from Canada, but the currency found some support in recovering oil prices. Both Brent and WTI crude brands have extended their gains on Tuesday, as central bankers vowed to protect markets from the coronavirus effect. Also, OPEC and its oil producing allies will likely continue their production cuts.


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