The pound to Canadian dollar exchange rate has started the new trading week on the front-foot, much to some investors surprise after last weeks Canadian GDP data for November came in above expectations. However, the Loonie was unable to capitalise on the good news amid the mounting concerns surrounding the coronavirus. The spread of the virus has triggered the World Health Organisation (WHO) to announce the coronavirus as a global health emergency. This pressure has weighed on the Canadian dollar as a risk-sensitive currency through a reduced market risk appetite. Meanwhile, GBP managed to remain steady in the pairing, starting the trading week with the upper hand. This mainly came after a run a of weakness for the Canadian dollar and the Bank of England’s interest rate decision which was announced last Thursday.
Canadian GDP Surprises Market but Isn’t Enough to Overcome Economic Hurdles
Canada’s GDP figures for November were released last week which came in above expectations. This shocked many investors as CAD has been on a bad run of late and continues to suffer at the hands of the Coronavirus. The GDP figure for November increased 0.1%, which reversed an equall-sized contraction for October, the market expected it would be left unchanged with a 0% reading anticipated. The Canadian economy also saw gains in some sectors which had been written off, adding to the surprise of the results.
The news of a growing GDP figures should be positive for CAD given the Bank of Canada (BoC) concerns above pace of growth in the final quarter and uncertainty surrounding the outlook of the 1.75% cash rate that has kept CAD one of the more desirable currencies over the last year. But the outlook for the Canadian dollar may look to reverse the positive figures suggests Royce Mendes, an economist at CIBC Capital Markets.
GBP Gains on BoE Decision but Predictions Suggest Volatility up Ahead for the Sterling
Pound sterling fared well in the latter stage of last week, with the announcement from the BoE that they would keep interest rates the same at 0.75%. Pre-meeting jitters saw the pound trend lower before the announcement, but it sharply regained its losses and then some after the announcement was made. Currently GBP lingers around the top performing currencies to start the week but with Brexit negotiations due to start this month, investors remain cautious of the volatility which could occur for the currency. The UK and EU have 11 months to negotiate a trade-deal which has been labelled by some as “impossible”.
Any unfolding’s in the Brexit saga are likely to sway GBP and thus the GBP/CAD pairing. For CAD, the coronavirus will be the main factor which will weigh on the currency going forward as the disease looks to show no signs of slowing down.
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