Pound Canadian Dollar (GBP/CAD) Exchange Rate Hits 9-Day High

Pound Canadian Dollar (GBP/CAD) Exchange Rate Peaks on CA GDP

(Updated 15:30, 30/06/2023) The Pound Canadian Dollar (GBP/CAD) exchange rate extended this morning’s gains into the European afternoon today, peaking at a 9-day high as Canadian data disappointed.

According to Statistics Canada, economic growth faltered in April 2023 contrary to expectations. While estimates indicate that growth resumed in May, the news did not fully offset investors’ disappointment.

Expert reviews on the data are mixed. Doug Porter, chief economist at BMO Capital Markets, observes:

‘It’s a mixed picture… From a bigger-picture view, it’s not at all surprising that the economy didn’t manage to grow in April, given the large public-sector strike.’

Nevertheless, money markets still see a higher than 50% chance of another rate hike in July – an expectation that may be helping cap losses for CAD.

Original article continues below:

Pound Canadian Dollar (GBP/CAD) Exchange Rate Rises as Sterling Morale Recovers

The Pound Canadian Dollar (GBP/CAD) exchange rate has so far hiccupped higher this morning, buoyed by confirmation of quarterly growth in the UK economy. A fresh GDP release from Canada later today may alter the exchange rate’s trajectory, however, if the country’s economy likewise expanded.

At the time of writing, GBP/CAD is trading at C$1.6766, up approximately 0.3% from today’s opening levels.

Pound (GBP) Pushes Higher on Brighter Outlook

Fears of an upcoming recession have weighed upon the Pound (GBP) this week, inciting a steep downturn in the Pound Canadian Dollar exchange rate on Wednesday. GBP/CAD staged a recovery yesterday before weakening once more overnight; into today’s session, Sterling is attempting to win back its losses.

Bolstering GBP as European trading began was a finalised UK GDP reading, which confirmed that Britain’s economy grew in the first quarter of 2023. The data reflected economic growth of 0.2% in April, after a 0.3% fall in March, which initially eased concerns that the UK is headed for a recession.

Another cause for this morning’s upturn in Pound exchange rates may be bond yield dynamics. As analysts at ING bank report:

‘Sterling is consolidating and must be enjoying support from implied short-dated yields over 5%. We made the point last week that the FX hedging costs were now very painful for foreign investors in the UK Gilt market – a factor that could help Sterling.’

Nevertheless, the Pound’s trading outlook is not without obstacles, as economists warn that a recession is not necessarily off the cards. Moreover, fluctuations are likely through today’s session, given it is the last trading day of June: accordingly, investors may adjust their positions.

Canadian Dollar (CAD) Investors Hopeful Ahead of Data Release

The Canadian Dollar (CAD) is strengthening against several peers this morning as investors anticipate economic growth and an upbeat business outlook survey.

The latest Canadian GDP reading is expected to print at 0.2% for the month of April, reflecting increases in mining, quarrying, oil and gas extraction, transportation and warehousing and real estate-related activities.

Meanwhile, ING bank observes that the Canadian Dollar has been one of the better G10 performers this year, adding that today’s business outlook survey will play an important role in the Bank of Canada (BoC)’s next interest rate decision.

Following a disappointing CPI release earlier this week, experts cautioned that the BoC had reason to skip raising interest rates at its next meeting, but subsequently ING analysts have remarked:

‘[The quarterly Business Outlook Survey] will help the BoC better understand both business inflation expectations but also the environment for corporates to be able to push higher prices onto consumers…

In general, we expect the Canadian Dollar to continue to perform well.’

Rising crude oil prices in the second half of this week may also be lending support to the ‘Loonie’.

GBP/CAD Exchange Rate Forecast: Volatility Ahead as Investors Reposition?

The Pound Canadian Dollar exchange rate may yet see volatility through today’s session as investors weigh the chances of a UK recession against the possibility of a rake hike pause from the Bank of Canada.

Regarding the former, UK markets are caught between lingering inflation and punishing interest rates.

Now is also good time for traders to adjust their positions ahead of the start of a new quarter. As UK investors brace for confirmation of a contraction in British manufacturing and service activity next week, it is likely GBP will face further headwinds.

Nevertheless, ‘Loonie’ sentiment may sour likewise as investors contemplate the possibility of a rise in national unemployment. Therefore, GBP/CAD may trade in a wide range through today and into next week.

Olivia Evershed

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