BoE Carney Expects UK Growth Pickup in 2019, GBP/CAD Exchange Rate Outlook Bolstered
The medium-term outlook for the GBP/CAD exchange rate moved further into the Pound’s favour on Tuesday, with Bank of England (BoE) Governor Mark Carney, stating that he expects UK economic growth to pick up in 2019 as Brexit uncertainty ebbs.
Speaking to the House of Lords’ Economic Affairs Committee Carney asserted that the bank is now preparing to upgrade its forecasts at its Inflation Report in February.
‘I would expect that in 2018 we will see a pick-up in this economy all things being equal – strong global growth, greater uncertainty’.
This outlook prompted a brief surge in demand for the Pound, (only to be subdued on Wednesday), but, more importantly, it added to this steadily growing optimism that the UK’s economic future might not be doomed to suffer quite as badly post-Brexit as analysts had previously thought.
CAPITA Emergency Measures in Spotlight – What could it mean for GBP Exchange Rates?
The Pound Canadian Dollar (GBP/CAD) exchange rate tumbled on Wednesday as markets reacted to news that the UK government outsourcer, Capita, has been forced to launch a drastic rescue plan -just weeks after the collapse of construction giant Carillion.
Shares in Capita fell by over 40% on Tuesday morning after the company warned about low profits, announcing its intentions to raise £700m from shareholders, the selling off of divisions and the scrapping of their dividend.
Not only did this news risk further embarrassment for the British government regarding the outsourcing of public contracts, it also boded poorly for the potential future of a variety of services within the public sector – a tangible threat to the UK’s future economic performance.
Nonetheless, Capita boss Jonathan Lewis will be dedicated to avoiding a crisis like the one that occurred at Carillion, hopefully leaving enough time to raise the necessary funds and prevent a full collapse.
Indeed, after the embarrassment that occurred with Carillion it is also unlikely that the government will let Capita fail to the same extent.
Trump Encouraged to Tread Carefully Around NAFTA, CAD Exchange Rate Outlook Strengthens
US President Donald Trump has acknowledged that he is facing internal pressure from various Republicans and business groups to remain within the North American Free Trade Agreement (NAFTA), news that renewed some hope for the future of the agreement.
Trump avoided specifically discussing NAFTA during his State of the Union address, though he did continue to vow to improve old agreements.
‘We will work to fix bad trade deals and negotiate new ones’, he told lawmakers gathered in the House of Representatives, continuing:
‘America has finally turned the page on decades of unfair trade deals that sacrificed our prosperity and shipped away our companies, our jobs, and our wealth. The era of the economic surrender is totally over’.
In this respect Trump’s intentions are clear; NAFTA must be ‘fair’ and ‘reciprocal’ in his mind before he will agree, and whilst he might be facing pressure to stay within the deal the US, Canada and Mexico are still at loggerheads over key points.
Nonetheless, this news helped buoy the Canadian Dollar, and any news of progress in NAFTA talks will have a similar effect.
Conversely, a lack of progress could hinder the Canadian Dollar, particularly if all parties refuse or fail to find compromise.