GBP/CAD Exchange Rate Zigzags as CA Unemployment Unchanged
(Updated 15:25, 05/01/2024) The Canadian Dollar made headway against the Pound and a couple of other currencies following the release of December’s employment report. The majority of gains were subsequently relinquished, however, as analysts digested the data.
The country’s unemployment rate remained unchanged at 5.8% rather than rising to 5.9% as expected; yet fewer jobs were added to the economy than forecast. While 0.1K jobs were added to the economy overall, full-time employment change actually printed in the minus figures at-23.5K.
Average hourly wages were up by a considerable 5.7% year-on-year, exceeding estimates – yet Canada’s participation rate fell from 65.6% to 65.4%. All considered a mixed bag of data, the contrariness of which is reflected in the response of CAD investors.
Commenting on the release, Doug Porter, chief economist at BMO Capital Markets, says:
‘The main story here is we are seeing some cool down in the job market. The one disturbing aspect for the (central) bank is that average hourly wages took a big step up in the month.’
Original article continues below:
Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted as Investors Await Jobs Report
The Pound Canadian Dollar (GBP/CAD) exchange rate is trending sideways this morning ahead of the latest jobs report from Canada. The unemployment rate is expected to have increased, although an uptick in average wages may cap losses for the currency.
At the time of writing, GBP/CAD is trading at C$1.6921, virtually unchanged from this time yesterday.
Canadian Dollar (CAD) on Tenterhooks as Employment Report Anticipated
The Canadian Dollar (CAD) is trading flatly against several peers today as investors await this afternoon’s jobs data.
In November, unemployment rose by 0.1% and is set to have done so again last month, potentially weighing upon CAD morale. Signs of a poor economic recovery could encourage a dovish stance from the Bank of Canada (BoC).
The central bank kept interest rates unchanged at 5% in December, for the third time in a row – leaving borrowing costs at a 22-year high. In its accompanying policy statement, the BoC acknowledged easing in the labour market, but remarked:
‘Governing Council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed.’
If today’s release incites fears of a dovish pivot, the ‘Loonie’ may weaken. This would be in line with analysts’ earlier sentiments, disclosed on Wednesday, that the ‘Santa Claus rally’ has begun to unravel.
Pound (GBP) Trades Mixed as House Prices Rocket
The Pound (GBP) is faltering in a mixed range this morning, as fresh data reveals that house prices in the UK shot up in December by 1.1% rather than the 0.1% forecast.
Experts attribute the increase to a shortage of available properties, with fewer people choosing to move due to high mortgage rates. The cost of borrowing to buy a house is a knock-on effect following the Bank of England’s (BoE) hawkish rate-hiking scheme.
Halifax – the UK’s biggest mortgage lender – commented upon the trajectory of housing prices, foregrounding the uncertainty of the market ahead:
‘As we move through 2024, […] buyers and sellers are likely to be naturally cautious when considering making a move.
While wage growth is now above inflation, helping ease cost of living pressures for some and improving housing affordability, interest rates are likely to remain elevated for as long as inflation remains markedly above the Bank of England’s target.’
Others warn of economic strain ahead, with Goldman Sachs observing that that UK homeowners are facing an estimated £19bn increase in mortgage costs by the end of next year as fixed-rate deals expire.
GBP/CAD Forecast: Exchange Rate Hinges on Canadian Jobs Data
Looking ahead, the Pound Canadian Dollar exchange rate is likely to trade according to this afternoon’s jobs report from Canada.
If the country’s unemployment rate indeed increases, ‘Loonie’ gains may be capped; although a corresponding increase in average earnings may inspire hopes of rising consumer spending. Such an eventuality could boost the Canadian economy.
Later in the session, Canada’s Ivey PMI is expected to ease from 54.7 to 52.4. If the release prints as expected, CAD may be dealt a further blow, further buoying GBP/CAD – yet continued expansion in the economy would likely provide some relief.