If you're a Canadian citizen emigrating to the UK, or a Canadian business owner making international payments to Great Britain, there's potentially helpful news about the exchange rate today. The Canadian dollar to pound interbank exchange rate has hit its highest in 2 weeks, or since April 30th, at 0.5739.
By comparison, back on May 5th, the CAD was as weak as 0.5643 versus the GBP. So it's since risen by close to +1 cent, or +1.7%. The loonie dollar has strengthened versus UK sterling for the last consecutive eight days, since May 5th.
To put this rise into context for you, CA$250,000 in pounds at today's interbank exchange rate of 0.5739 would be worth £143,475. By comparison, at the interbank exchange rate on May 5th of 0.5643, CA$250,000 would have been worth £141,075. So for the same Canadian dollar amount, that's an increase of +£2,400 since last week.
This may benefit you, because when you transfer money to the UK from your Canadian dollar bank account, you could now get a higher pound total, compared to in the last few days.
If you're importing UK goods and services to Canada, this could help you to buy British products at a cheaper price. Or, if you're emigrating to the UK, it might lift your pound total, to help you settle in.
A key reason why the Canadian dollar to pound interbank exchange rate has reached this 2-week high is because Canada's economy has outperformed expectations in the last week. In particular, Canada's joblessness fell in April, while Canada's exports rose in March.
Meanwhile, looking ahead, positive wage growth figures in the UK could support the pound this week, even though the Conservatives and Labour’s cross-party Brexit talks look close to breaking down.
Let's take a look at these factors that have lifted the exchange rate, to help you with your money transfer.
Canada's Unemployment Rate Surprisingly Falls in April
A first partial explanation why the CAD has reached this 2-week high versus the GBP is because Canada's unemployment rate unexpectedly fell in April, said official agency Statistics Canada last Friday.
Canada's unemployment rate dropped by -0.1% in April compared to the month before, to 5.7%. This beat financial markets' forecasts for Canada's joblessness to hold steady at 5.8%.
In particular, Canada's unemployment dropped in April, because Canada created a bumper +106,500 new jobs last month. This trounced economists' predictions for +10,000 new positions, as well as March's -7,200 fall in jobs. This was the biggest increase in Canada's job creation since comparable records began, in 1976.
Canada's unemployment rate fell in April, even though the country's labour force participation rate increased last month. To be specific, the percentage of people in Canada's job market climbed by +0.2% in April, to 65.9%, ahead of forecasts for +65.7%. This tells us that Canada's unemployment rate fell, even though more Canadians were looking for work in April.
Most of the jobs that Canada created in April were full-time jobs, telling us that this is quality new employment, as opposed to part-time roles or higher self-employment. Canada has created an impressive +426,400 new positions in the last 12 months, a +2.3% yearly gain in employment.
"We’re drawing in people, and that tells you how tight the labour market is," according to Tony Stillo, director of Canada economics at Oxford Economics, about this data. This bodes well for Canada's economic growth in the coming months, so has contributed to strengthen the Canadian dollar versus the pound.
Canada's Exports Increase in March, Led by Energy Products
In addition, another reason why the Canadian dollar to pound interbank exchange rate has hit this 2-week high is because Canada's exports rose in March, said official agency Statistics Canada last Thursday.
Canada's exports increased by +3.2% in March compared to the month before, for a total value of CA$49.05 billion. This exceeded economists' predictions for CA$47.5 billion, plus February's figure of CA$47.54 billion too.
In particular, Canada's exports increased in March, buoyed by a +7.7% rise in the shipment of energy products, and an +8.4% increase in exports of passenger cars and light trucks.
As a result of these upbeat export statistics, Canada's trade deficit fell for the third consecutive month in March, to -CA$3.21 billion. This compares to a shortfall of -CA$3.42 billion in February.
This data suggests that international demand for Canada's goods and services increased in March. As a result, Canada's GDP (Gross Domestic Product) growth might accelerate in Q1 2019. In turn, this has helped boost the value of the Canadian dollar versus the pound, to this 2-week high.
Canada's Economic Growth Forecast to Recover in Early 2019
Also, a further factor why the CAD has reached this 2-week high versus the GBP is because, following these upbeat economic releases, it's forecast that Canada's GDP growth could accelerate in early 2019.
In Q4 2018, between October and December last year, Canada's economy expanded by just +0.1%. This is close to stagnation. However, following these reports that Canada's unemployment fell in April, and Canada's exports rose in March, it's now thought that Canada's economic growth could revive in early 2019.
In particular, Avery Shenfeld, managing director and chief economist, CIBC Capital Markets, said following these positive economic releases: "So much for the soft economy."
Meanwhile, Robert Kavcic, senior economist at BMO Capital Markets, said that Canada's economic "weakness should prove transitory, as we and the Bank of Canada expect."
If Canada's economy accelerates in early 2019, this would give international money managers an incentive to invest in Canadian assets. In turn, this would lift demand for the Canadian dollar, so further lifting the value of CAD versus GBP.
UK Unemployment to Stay Low, Brexit Talks May Break Down
Meanwhile, looking ahead, the Canadian dollar to pound interbank exchange rate could be affected by the mixed UK economic and political outlook. In particular, while it's forecast that British unemployment stayed low in March, the Conservatives and Labour's cross-party Brexit talks look close to collapse.
Tomorrow, Tuesday 14th May at 09.30, we'll learn the UK unemployment rate for the three months to March 2019. Economists predict that Britain's joblessness held at 3.9%, the same as February. If so, this would tell us that UK joblessness remains at its lowest since the mid-1970s, close to when comparable records began.
Moreover, we'll also learn the UK's latest wage growth figures on Tuesday. Financial markets predict that UK wage growth increased by +3.4% in March, close to February's +3.5%. If these figures prove accurate, UK wage growth would remain close to its highest in 10 years, since the financial crash in 2008.
With this in mind, it's thought that the UK's tight labour market will continue to support Britain's economic growth in early 2019. This is because, with jobs plentiful and wages rising, Britons often feel more inclined to spend at the shops, thus fuelling the UK's GDP expansion. This might help counteract the ongoing Brexit uncertainty, and support the pound.
That said, the UK remains in Brexit limbo. Last week, we learnt that the Conservatives and Labour's cross-party Brexit negotiations came close to failing, as Labour accused the government of being "disingenuous" about entering a Customs Union with the EU. This uncertainty might continue to weigh on Britain's business optimism, and so drag down sterling.
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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 email [email protected]