Pound Canadian Dollar Exchange Rate Muted Despite Positive UK Growth Figures

(Updated 16:58 14/01/22)

The Pound Canandian Dollar (GBP/CAD) exchange rate has remained subdued over the course of the day, trading within a narrow range.

At time of writing the GBP/CAD exchange rate is at around $1.7153, virtually unchanged from this morning’s figures.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Rangebound amid Risk-On Trading

The Pound Canadian Dollar exchange rate fell overnight but has traded within a narrow range today, with the Canadian Dollar (CAD) boosted by a risk-on market mood. Despite GDP figures indicating the UK economy has returned to pre-pandemic levels, the Pound (GBP) remains under pressure following allegations of further illegal gatherings at 10 Downing Street.

At time of writing the GBP/CAD exchange rate is at around $1.7143, largely unchanged from this morning’s figures.

Pound (GBP) Buoyed by Positive November Growth Data Despite Fresh No 10 Party Reports

The Pound (GBP) has risen against many of its rivals today following better than expected GDP figures. Sterling’s upward movements may have been capped however by fresh reports of illegal gatherings at 10 Downing Street days before Prince Philip’s funeral last year.

GDP growth figures for November came in above forecasts on Friday morning, indicating that the UK’s economy rose above pre-pandemic levels. The country’s economy grew at a rate of 0.9% and is thought to have been driven by a surge in Christmas shopping and a spike in restaurant bookings. The data did not cause drastic upward movement in the Pound however, as many analysts await growth figures for December and January that might fully reflect the impact of the Omicron variant.

Suren Thiru, head of economics at the British Chambers of Commerce, said:

‘Stronger growth in November is likely to be followed by a modest fall in output in December and January, as consumer caution to socialise and spend, and mounting staff absences sparked by Omicron and plan B limit activity.’

Sterling is likely to face domestic headwinds today following fresh allegations of illegal gatherings at 10 Downing Street. Reports on Thursday of two leaving parties on 16 April, the day before Prince Philip’s funeral, have caused widespread condemnation from across the political spectrum with one Conservative MP citing a ‘moral vacuum at the heart of our government’.

Canadian Dollar (CAD) Pushed Upward by Rising Oil Prices

The Canadian Dollar (CAD) has been boosted against its rivals by a risk-on trading environment, as well as an uptick in the oil prices.

Oil prices have slowly climbed today as a severely weakened dollar has boosted the commodity. Upward gains for crude may be limited however, as the release of China’s oil reserves and lessened demand due to the spread of the Omicron variant cause uncertainty amongst traders.

The prospect of an interest rate hike by the Bank of Canada (BoC) may have also helped buoy the Canadian Dollar today, as economists report that the country’s moves to green energy may see a further rise to inflation. The investment may also push prices up, with the BoC signalling that a rate hike could come as soon as April 2022.

GBP/CAD Forecast: Will Central Banks Raise Interest Rates Early?

Next week the UK is forecast to see unemployment rates remain relatively unchanged in further signs of a tightening labour market. Wednesday’s expected rise to inflation is also likely to place pressure on the Bank of England (BoE) to raise interest rates ahead of schedule.

The coming week for Canada is expected to deliver largely unchanged inflation figures representing an 18-year high, likely placing additional pressure on the BoC to consider an interest rate rise. Friday’s retails sales for December are also expected to fall as the impact of the Omicron variant is felt, likely pushing CAD down.

Gareth Monk

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