The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate remained firmer on Christmas Eve as many market participants were away for the Christmas and New Year holidays. The currency pair is forecast to experience muted trading until the start of 2015.
The ‘Loonie’ did find some support as oil prices rose to a two-week high and from domestic data which showed that the Canadian economy expanded by 0.3% in the third quarter of the year.
Prices of oil rose due to Tuesday’s data out of the US showing that the world’s largest economy expanded by its fastest pace in more than a decade, suggesting that demand for the commodity will rise in the USA.
Canada’s gross domestic product grew by 0.3% in October, according to Statistics Canada. While the GDP growth was down slightly from the previous month, it was still well ahead of pre-report expectations calling for growth of only 0.1%.
‘We are encouraged that the economy is keeping its pace coming down the home stretch of 2014. A near 3% growth outlook for two consecutive quarter’s means that the Canadian economy is making meaningful headway in narrowing whatever is left of remaining slack. But the real worries lie in what the collapse in crude means for next year,’ said economists from CIBC.
The data offered little in the way of support due to the muted trading conditions.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate fell by 0.5% as weak data out of the UK weighed upon the Pound and as Canadian GDP bolstered the ‘Loonie’.
Canada’s economy expanded in the third quarter despite the rapid fall in oil prices, it grew by 0.3%.
“Notable gains were recorded in mining and oil and gas extraction as well as manufacturing,” the data agency said in a release. “Construction also increased in October. In contrast, utilities and the agriculture and forestry sector declined,”said Statisitcs Canada after publishing the report.
Earlier, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate weakened on Tuesday as data out of the UK came in worse than forecast and as the ‘Loonie’ received some support from a rise in oil prices.
UK GDP Revised Lower
According to the London based Office for National Statistics (ONS) the UK economy expanded for a seventh straight quarter in the third quarter of 2014 but investment and exports plunged.
The report showed that from the preceding year the nation’s economy expanded by 2.6%, the ONS had previously expected a figure of 3%.
On a quarterly basis the economy expanded by 0.7%, a figure that matched expectations but was lower than the 0.9% seen in the second quarter.
The ONS said that Britain’s annual growth rate was revised down to 2.6% from 3% because investment by businesses and the government was weaker than expected over the last year. Business investment declined by 1.4%.
UK Current Account Deficit Soars
Also weighing upon the Pound was a separate report, which showed that the UK’s current account deficit made a big jump in the third quarter of the year as falling exports to the weakened Eurozone and imports rose.
The nation’s deficit widened from £23 billion to £27 billion as direct foreign investment fell sharply and payments to foreign investors increased. One positive of the report was that the nation’s trade deficit narrowed slightly from £9.2 billion to £9 billion.
Oil Prices Higher on Libya Fighting
The Canadian Dollar advanced against the Pound as it found support from slightly higher oil prices and the upcoming release of domestic GDP data.
Oil prices have firmed due to reduced output because of the heavy fighting taking place in Libya. The nation’s competing governments have continued to fight one another and the conflict has forced the closure of a third major oil port.
Libya has had two governments and parliaments since a group called Libya Dawn seized the capital Tripoli in August by expelling a rival faction, installing its own prime minister and forcing the internationally recognised cabinet to operate out of the east with the elected House of Representatives.
In the long term, oil prices are forecast to continue to drop as production out of the USA and OPEC nations continues to remain high.
Economists will now be looking ahead to upcoming Canadian GDP data for further direction.