The Pound to Canadian Dollar exchange rate saw limited upside potential as markets began to brace for the release of the first quarter UK gross domestic product report.
Last Week: Jump in Unemployment Fuels Canadian Dollar Selling
Demand for the Canadian Dollar weakened significantly ahead of the weekend as April’s labour market data proved worse than forecast.
Investors were particularly disappointed thanks to the sharp uptick in the unemployment rate, which jumped from 7.5% to 8.1% on the month.
With wage growth also showing signs of slowing concerns over the health of the wider Canadian economy picked up, offering the GBP/CAD exchange rate a solid rallying point.
Growing optimism over the outlook of the UK economy also helped to shore up the Pound, with the risk of another Scottish independence referendum fading in the wake of last week’s election results.
Three Things to Watch out for This Week
1. UK Gross Domestic Product
Support for the Pound looks set to weaken on Wednesday with the release of the first quarter UK gross domestic product reading, which is forecast to show a sharp contraction of -1.6% on the quarter.
Evidence that the UK economy lost significant momentum in the first three months of the year could weigh heavily on the GBP/CAD exchange rate, even if the monthly growth rate proves positive.
2. UK Balance of Trade
On the other hand, a narrowing of the UK trade deficit in March could offer the Pound a temporary boost.
As long as trade conditions show signs of improvement after February’s disappointing slump the mood of GBP exchange rates could pick up once again.
3. Canada Manufacturing Sales
A rallying point may be in store for the Canadian Dollar ahead of the weekend, meanwhile, with forecasts pointing towards an improved manufacturing sales figure.
A sharp rebound in sales activity on the month could help to restore some measure of confidence in the economic outlook, limiting the potential for any GBP/CAD exchange rate gains.
A disappointing UK gross domestic product report could see the Pound to Canadian Dollar exchange rate reversing some of its recent gains this week.