Pound Canadian Dollar Exchange Rate Climbs amid Better-than-Expected UK GDP
The Pound Canadian Dollar (GBP/CAD) exchange rate is firming after the UK economy contracted less than expected.
At time of writing the GBP/CAD exchange rate is trading around $1.7175, a 0.27% jump from this morning’s opening levels.
Pound (GBP) Supported by Resilient Service Sector
The Pound (GBP) is buoyant this morning in the wake of better-than-expected GDP growth data. Against expectations of a 0.3% decline in June, the UK economy only contracted 0.1%.
The Office for National Statistics (ONS) reported that the outcome was better than expected. Despite the bank holiday for the King’s Coronation was predicted to result in a larger fall in output. Ongoing strike action also contributed to a fall in economic activity. However, against predictions that the service sector would contract, its output was flat, but both construction and industrial activity posted declines. The report added:
‘On the positive side, we had comments suggesting industries in the arts, entertainment and recreation sector benefitted from the extra bank holiday.
‘There were also comments on both increased and reduced output received in the accommodation and food services sector.’
Canadian Dollar (CAD) Supported by Stronger-than-Expected Economy
Meanwhile, the Canadian Dollar (CAD) is remaining moderately supported this morning in the wake of the Bank of Canada (BoC) interest rate decision yesterday. The central bank opted to raise the interest rates by 25bps to a 22-year high of 5%.
Against expectations of another raise were met by the central bank as the Canadian economy remained stronger than expected amid sustained demand. Tiff Macklem, BoC Governor commented on the latest decision and left the door open to further hikes:
‘We are concerned that the progress to price stability could stall and inflation could even rise again. If there are upside surprises, as I said, we are trying to balance the risks of over and under tightening.
‘If new information suggests we need to do more, we are prepared to increase our policy rate further. But we don’t want to do any more than we have to.’
Pound Canadian Dollar Forecast: Market Mood to Dictate Movement?
Looking ahead, the Pound Canadian Dollar exchange rate could trade on market sentiment amid a lack of major economic data. The Pound could remain supported on better-than-expected GDP growth data, but wider concerns of the UK economy could limit gains.
As for the Canadian Dollar, if WTI Crude oil prices continue their recovery, the commodity-linked ‘Loonie’ could head into the weekend stronger. An improving market mood has seen oil prices relatively supported above the $75 a barrel mark, and if the rebound continues, the Canadian Dollar could benefit.