Fears over Trump Trade Protectionism Drives GBP/CAD Higher
The Pound Canadian Dollar (GBP/CAD) exchange rate rocketed higher last week as concerns over US trade protectionism weighed heavily on market risk appetite.
These fears were mostly driven by a shakeup of personnel in the White House, starting with the sacking of Secretary of State Rex Tillerson.
Some observers suggested that the shakeup would make it easier for Trump to pursue his protectionist policy aims, prompting a sharp downturn in the Canadian Dollar.
Meanwhile an empty data calendar meant that the Pound struggled to find its own momentum last week, with only an upbeat 2018 growth forecast in Philip Hammond’s Spring Statement really delivering any movement in GBP.
Sterling (GBP) Advances as UK Employment Figures Impress
The Pound is edging higher against the Canadian Dollar and the majority of its other peers this morning, in the wake of some impressive UK employment figures.
According to data published by the Office for National Statistics (ONS) the UK unemployment rate fell back to a 42-year low of 4.3% in January, beating expectations it would hold at 4.4%.
This came as the employment rate struck a record high of 75.3% in the three months to January, with a total of 32.25 million people in work.
However it is the accompanying wage growth figures that are likely to have prompted the majority of the Pound’s gains this morning.
Figures show that wage growth accelerated from 2.7% (revised up from 2.5%) to 2.8% in January, suggesting that pay is finally beginning to catch up with inflation.
Geraint Johnes, Professor of Economics at Lancaster University Management School said:
‘Encouraging news on pay includes the 2.8% rise in total pay […] alongside the drop in consumer price inflation announced yesterday, this heralds an early end to the squeeze on real earnings.’
Canadian Dollar (CAD) Buoyed by NAFTA Optimism
At the same time the Canadian Dollar is showing some resilience this morning on reports of positive progress in NAFTA renegotiations
A report in the Globe and Mail suggests that Trump’s administration may have dropped a demand that at least 50% of the components of cars imported to the US would have to be manufactured in the US.
The news was seen by many as a possible sign of a breakthrough in talks and investors will be hopeful that it diminishes the chances of the US simply walking away from the table.
GBP/CAD Forecast: BoE to Signal Upcoming Rate Hike?
Looking ahead the GBP/CAD exchange rate may see significant movement tomorrow as the Bank of England (BoE) concludes its latest policy meeting.
While the BoE is not expected to make any alterations to its monetary policy at this month’s meeting, there is significant speculation that the bank may hint at an upcoming rate hike.
Given today’s upbeat wage growth figures, markets are likely to be optimistic on the chances of the BoE targeting a May rate hike.
Meanwhile the focus for CAD investors this week will be on the release of Canada’s latest CPI figures later this week, with a possible drop in headline inflation likely to pressure the Canadian Dollar.