The pound to Canadian dollar interbank exchange rate has risen by +1.12%, from a low of 1.6114 on Monday 9th to 1.6295 in the past day.
This could be useful information for you, if you’re a Briton making regular payments to Canada, to pay your mortgage in Ontario or Montreal, or to buy Canadian currency for your business.
This is because, when you transfer money to Canada from the UK, you might now get a higher Canadian dollar total. This is compared to if you’d exchanged currencies earlier this week.
In turn, this could make it more affordable for you to pay your Canadian mortgage, or lower your international payments costs to import Canadian goods to the UK for your customers.
To stay up-to-date with the pound to Canadian dollar interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, select ‘GBP’ to ‘CAD’ to see the last week’s interbank exchange rates.
Also, to find out what’s affecting the value of sterling versus the loonie dollar, visit Pure FX’s GBP to CAD Exchange Rate Updates page. Here, click on the newest article for the latest news.
One factor that may have caused the pound to rise against the Canadian dollar in the last day is because UK economic data has consistently beat forecasts, including UK GDP, unemployment and earnings.
However, looking ahead, sterling’s value versus its Canadian counterpart could be affected, because Canada unexpectedly created 81,100 new jobs in August, it was revealed last week.
In addition, looking to the foreseeable future, the Canadian dollar may also be influenced, because the Bank of Canada is holding interest rates, at a time when other central banks are cutting.
Please find below a further explanation of why sterling has gained in value against the Canadian dollar in the past day, and what may affect the GBP to CAD interbank exchange rate, looking forward.
Pound to Canadian Dollar Rate Rises, as UK Economy Exceeds Expectations
As I’ve mentioned, one reason why the pound to Canadian dollar interbank exchange rate has strengthened in the past day is because the UK economy has consistently beat forecasts so far this week.
This may have contributed to lift the value of sterling on the interbank market, because this tells us that the UK remains resilient to the UK’s Brexit uncertainty, and continues to grow in spite of it.
To begin with, on Monday the Office for National Statistics (ONS) revealed that UK GDP (Gross Domestic Product) surprisingly grew by +0.3% in July, compared to the month before.
This exceeded economists’ predictions for softer +0.1% growth, as well as June’s stagnant figure of +0.0%. In particular, the UK’s services, manufacturing and construction sectors all grew faster.
This may have helped lift the pound, first because UK GDP had shrank by -0.2% in Q2, between April and June, so it was feared that the UK economy might soon enter recession, if this trend continued.
However, what with the UK accelerating in July, according to these statistics, it’s now less likely that UK GDP will contract for two consecutive quarters, the definition of a technical recession.
In addition, yesterday the ONS revealed that the UK Unemployment Rate unexpectedly fell by -0.1% in the three months to July, to just 3.8%.
This handily beat investors’ forecasts that UK joblessness would hold steady at 3.9%, and is the UK’s joint-lowest unemployment rate since late-1974, or 45 years ago. This tells us that the UK job market remains in the pink for now.
In particular, it’s reported that 369,000 people aged 16 and over joined the UK’s workforce in the past year, for an employment total of 32.8 million.
Of these newly employed people, 284,000 were women, and the ONS tells us that there are now 15.5 million employed women in the UK. So British companies are continuing to take on workers, even with the daily Brexit headlines.
Lastly, yesterday the ONS also revealed that UK Average Earnings Including Bonuses rose to +4.0% in the three months to July. This is well ahead of the UK’s inflation of 1.9%, so points to healthily rising wage packets and living standards for Brits.
This may encourage British households to spend more, fuelling the UK’s economic growth in the foreseeable future.
These upbeat economic releases have lifted sterling, because they point to the UK’s underlying strength, even as the Brexit situation shifts daily.
In particular, companies continue to grow, take on staff and pay higher wages, while politicians in Westminster and Brussels debate. This economic strength encourages investors to buy British assets, thereby lifting the value of the pound.
GBP to CAD Rate May Be Influenced, as Canada’s Job Creation Surges
However, that said, the pound to Canadian dollar interbank exchange rate could be affected in the foreseeable future, because Canada’s job creation unexpectedly shot up in August, said official statistics last Friday.
This could increase the value of the Canadian dollar, because this points to Canadian economic resiliency, in the face of the USA’s and China’s increasingly tense trade war.
Last Friday 6th September, Statistics Canada (StatsCan) revealed that Canadian companies created 81,100 new jobs in August. This easily exceeded economists’ estimates for 15,000 new roles, as well as July’s loss of -24,200 positions.
In particular, 42,000, or over half, of these new jobs were taken up by women aged 15-to-24, the majority in services roles like finance, insurance and real estate.
This was the sharpest rise in Canada’s job creation in five months, since April 2019’s increase of 106,500 jobs, and follows three months of falling or flat job creation figures.
Ontario and Quebec enjoyed the biggest employment increases, while compared to a year ago, Canada has created 471,300 new jobs, most of which were full-time. So this points to Canada’s job market strength.
Meanwhile, it’s worth adding that Canada’s unemployment rate held steady at 5.7% in August, said StatsCan last Friday, as forecast. Normally, we’d expect higher job creation to cut the joblessness rate.
However, Canada’s labour force participation rate, measuring the number of Canadians actively looking for work, surprisingly rose by +0.2% in August, to 65.8%. So as more people entered the job market, this held the unemployment rate steady.
These positive job market statistics may influence the value of the Canadian dollar, because they tell us that Canadian companies are continuing to hire, at an uncertain time for the global economy.
In particular, the USA’s and China’s trade war is putting pressure on countries worldwide, from German industry to New Zealand agriculture. Yet Canada’s companies seem to be resisting this.
Sterling Versus Canadian Dollar May Be Affected, as BoC Holds Interest Rates
Furthermore, another factor that may influence the pound to Canadian dollar interbank exchange rate, looking ahead, is Canada’s economic resiliency, plus the fact that the Bank of Canada (BoC) held interest rates steady at 1.75%, at its meeting last Wednesday.
This may affect the Canadian dollar, because higher interest rates make buying CAD-denominated assets more profitable.
To begin with, last Friday 6th September, we learnt that Ivey’s Canada PMI (Purchasing Managers’ Index) a trusted measure of economic activity in Canada, rose to 60.6 in August.
This easily exceeded July’s result of 54.2, as well as forecasts for a slowdown to 53.0. Also, this figure is well above the 50.0 figure that separates growth from contraction, pointing to rapid expansion.
In addition, last Wednesday 4th September, the BoC kept interest rates steady at 1.75% as forecast. In particular, BoC Deputy Governor Lawrence Schembri said that: “the economy continued to show strength while the global backdrop weakened.”
This is even though other major central banks, like the US Federal Reserve or European Central Bank have already cut or plan to soon.
So this suggests that, while other central banks think that their economies need greater monetary support, particularly in the face of the United States’ and China’s trade war, the BoC is comfortable holding interest rates relatively high.
This is an expression of confidence in Canada’s economy, and also, makes investing in Canada more attractive for the world’s money managers. So this may influence the value of the Canadian dollar.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or Contact Us.