Pound Canadian Dollar Exchange Rate Firms amid 0.5% GDP Growth
The Pound Canadian Dollar (GBP/CAD) exchange rate briefly spiked as the UK’s economy grew larger than expected. But lengthy recession fears remain as the economy shrank 0.3% in a quarter.
At time of writing the GBP/CAD exchange rate is trading around $1.6767, a 0.28% jump from this morning’s opening levels.
Pound (GBP) Strengthened Despite Weakening Economy
The Pound is finding modest strength this morning in the face of a better-than-expected GDP growth. Compared to September’s 0.6% decline, the UK’s economy bounced back and grew 0.5%.
The bounce back came after the economic impact of the nation’s mourning period saw many businesses close. However, despite a better-than-expected GDP growth MoM, in the three months from August to October, the UK’s economy contracted by 0.3%. Overall output in the economy is marginally above pre-Covid levels, but the economic outlook remains bleak. With downbeat forecasts expecting further slowdowns, investors remain cautious.
Lengthy recession fears remain, however, with an expected second quarter of slowing economic activity, signalling a technical recession. Chancellor Jeremy Hunt commented that high inflation remains a burden on the economic growth worldwide, and warns of the tough times ahead:
‘While today’s figures show some growth, I want to be honest that there is a tough road ahead. Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war, and high global gas prices.’
Canadian Dollar (CAD) Undermined by Cautious Market Ahead of US Inflation
Meanwhile, the Canadian Dollar is struggling for demand this morning amid a cautious market mood. Investors are bracing for a busy week of key economic indicators.
However, lending some modest support to the global market sentiment, and in turn the Canadian Dollar, is the continued positivity from China. As the country seemingly appears to be retreating from its zero-Covid stance, fears of a continued global slowdown are allayed. Chinese officials announced that it will be taking the Covid tracking application offline next week.
Meanwhile, oil prices remain low, weighing on the commodity-linked ‘Loonie’. WTI Crude remains pressured and is slumping close to a one-year low below $70 a barrel. A weakening global economy continues to be compounded by supply issues.
Pound Canadian Dollar Forecast: UK Employment Data to Weigh on Sterling?
Looking ahead, the Pound Canadian Dollar exchange rate could see further movement with the release of labour market data for the UK. An expected climb in unemployment could see the Pound retreat.
Meanwhile, a speech from Bank of Canada (BoC) could weigh on the ‘Loonie’. BoC Governor Tiff Macklem is expected to speak. Any further hints of monetary policy could influence the Canadian Dollar.