GBP/CAD Exchange Rate Steady on Dim UK Economic Outlook
The Pound Canadian Dollar (GBP/CAD) exchange rate held steady today, with the pairing currently trading around CA$1.721 after the release of the flash UK GDP report for the fourth quarter showed that the British economy had stagnated in December.
Seamus Nevin, Chief Economist at Make UK, was downbeat in his assessment, commenting:
‘Business confidence in industry remains fragile with concerns about our future trade rules meaning that the taps of investment are unlikely to be turned on anytime soon. This is the main cause for concern so all eyes will be on the nature and quality of any trade deals secured over the next 11 months’.
Due to rising uncertainty over the British economy post-Brexit, and with fears that a UK-EU trade deal could fail to emerge beyond the December 2020 ‘transition period’ deadline, market appetite for the Pound remains subdued.
Today also saw the UK manufacturing production report for December sink below forecasts at 0.3%, while year-on-year industrial production sank by 1.8% and further added to concerns over the UK’s manufacturing and industrial sector.
GBP/CAD Exchange Rate Rangebound, Coronavirus Weighs on Risk Appetite for ‘Loonie’
The Canadian Dollar (CAD) continues to suffer from rising fears over the spread of the coronavirus, which has particularly haunted market appetite for risk-correlated currencies like the ‘Loonie’.
With Canada’s economy being particularly reliant on trade with China, news that the Chinese economy – which is the second largest in the world – could face a negative backlash from the epidemic would directly hinder Canada’s domestic economic growth.
Canadian Finance Minister Bill Morneau commented:
‘It’s a significant impact. We also know that the impacts on Canada will be real – impacts on tourism, impacts on the oil sector and, of course, impacts on supply chains for any business that has a supply chain that is integrated with Chinese producers or Chinese consumers.’
GBP/CAD Outlook: Could the ‘Loonie’ Fall on Risk-Off Market Mood?
Pound (GBP) investors will be looking ahead to tomorrow’s UK Autumn Forecast Statement from the HM Treasury. Any dovish comments about the British economy, however, would prove Pound-negative.
The Canadian Dollar (CAD), meanwhile, will continue to be driven by developments around the coronavirus outbreak, with any further signs that this could have a negative impact on the Chinese economy weakening market appetite for the risk-sensitive ‘Loonie’.
The GBP/CAD exchange rate will likely remain volatile this week as the UK’s economic outlook continues to darken with increasing uncertainty over the possibility of a UK-EU trade deal being secured by the end of the ‘transition’ period.