Pound Canadian Dollar (GBP/CAD) Exchange Rate Firms amid Predictions that the UK Could Avoid Recession
The Pound Canadian Dollar (GBP/CAD) exchange rate is firming today, following predictions that the UK may be able to avoid a recession.
At the time of writing, GBP/CAD is trading around CA$1.6181, a rise of roughly 0.2% from the morning’s rates.
Pound (GBP) Strengthens on Optimistic UK Forecasts
The Pound (GBP) is on an upswing this morning, following an optimistic forecast from the National Institute of Economic and Social Research (NIESR).
The report pointed to a likelihood that the UK could sidestep a recession in 2023. However, this was accompanied by a slashed growth forecast, which may be limiting gains.
Further capping gains could be the gloomy assessment that rising energy bills and soaring food costs would deepen the cost-of-living crisis.
However, an upbeat market mood could also be adding a tailwind to the increasingly risk-sensitive Pound. The FTSE100 has hit a record high today, which could be contributing to the Pound’s strength this morning.
Canadian Dollar (CAD) Stumbles on Dovish BoC Speech
The Canadian Dollar (CAD) is rangebound this morning, following a dovish speech from Bank of Canada (BoC) Governor Tiff Macklem.
In his speech, Governor Macklem outlined the BoC’s monetary policy. He explains that he sees inflation as turning a corner, and took a dovish stance towards future rate hikes.
Macklem stated:
‘Instead, we need to pause rate hikes before we slow the economy and inflation too much. And that is what we are doing now. Our assessment that it is time to pause is based on what we have seen so far and on our forecast for economic growth and inflation.’
With investors now expecting a pause in further hikes, CAD’s appeal is on a downswing so far in today’s session.
However, rallying oil prices could be cushioning the Canadian Dollar. At the time of writing, crude oil prices are trading around $78.106, a rise of roughly 1.25% from the morning’s opening rates.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast: UK GDP Data in Focus
Looking ahead for the Pound, Friday sees the release of the latest GDP data for the UK. Of key importance is the quarterly release, which is forecast to show that the UK economy stalled during Q4.
If this prints accurately, it may show that the UK economy has narrowly avoided entering a recession, and strengthen Sterling. However, with the monthly and yearly releases pointing to substantial slowdowns, and a monthly contraction, the picture is mixed.
As such, any gains from avoiding a recession may be limited by the UK’s economy remaining weak, potentially leading to muted support.
For the Canadian Dollar, the core driver of movement could be January’s unemployment rate, due for release on Friday.
The data is forecast to show an increase in the rate to 5.1%, which could weigh on the ‘Loonie’. With unemployment increasing, it may show that the Canadian economy is continuing to struggle.
Elsewhere, oil price fluctuations could continue to assist the oil-linked Canadian Dollar. With oil prices currently rising, if they continue CAD could firm.