GBP/CAD is extending its recover, after two straight bullish sessions. Currently, the pair is trading at 1.7003, up 1.57% as of 11:45 AM UTC.
Both the British and Canadian economies are trying to mitigate the negative effects of the Covid-19 pandemic.
Recently, the pound reacted positively on a series of economic data, even though it points to an unprecedented recession.
UK Services PMI Sinks to 35.7
IHS Markit data showed that Britain’s economy is tumbling at a record pace, as businesses in the services industry shut down amid the coronavirus epidemic. The preliminary services purchasing managers’ index (PMI) slipped in March to 35.7 from 53.2 in February, while analysts hoped for a decline to 45.0.
Nevertheless, investors reacted to manufacturing PMI, which fell only to 48.0 from 51.7, while analysts expected a decline to 45.0.
The flash composite PMI, which comprises about 85% of companies operating in the UK, crashed to 37.1 from 53.0, which is the lowest level on record and below all forecasts.
The survey was conducted before the government led by Prime Minister Boris Johnson ordered the closure of all restaurants, pubs, cinemas, and other businesses open to the public. The PMI data suggests that the GDP would fall at a quarterly rate of up to 2.0%.
Chris Williamson, chief business economist at IHS Markit, commented:
“This decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter.”
The government and the central bank have pledged to support the economy. Finance minister Rishi Sunak said last week that businesses would get 330 billion pounds in loan guarantees. Elsewhere, the Bank of England said that it would purchase a record 200 billion pounds of government debt and other assets, while the interest rate was cut to 0.1%.
Despite the gloomy picture, the pound has managed to stay strong against the Loonie. Investors also paid attention to the recent report from the Confederation of British Industry (CBI). It said that the balance of order books for March fell to -29 from -18, but analysts expected a decline to -35.
Nevertheless, the index of manufacturing expectations for the next three months fell to -20 from +8 in February. Anna Leach, the CBI’s deputy chief economist, commented:
“With expectations for output set to fall in the coming months, it’s now more important than ever manufacturers get the support they need.”
