The Pound Canadian Dollar (GBP CAD) exchange rate strengthened overnight on Thursday, despite a notable jump in Canada’s GDP.
Growth in the North American economy beat expectations that it would reach 2.0% as it rallied to 2.6% at the end of 2016, with the encouraging figures expected to roll into 2017.
The rise was prompted by strong exports of both goods and services, with robust consumer consumption at home also playing a part.
Bank of Montreal chief economist Douglas Porter said;
‘Canadian real GDP ended 2016 in surprisingly healthy shape, the evidence continues to mount that the growth landscape is shifting for the better.’
However the rise was not enough to offset a dovish statement from the Bank of Canada (BOC) earlier in the week following its latest rate decision.
The Bank voted to keep interest rate unchanged at 0.5% as it citied subdued wage growth and working hours as major concerns for the future economic health of Canada.
However the Pound also started to cede ground this morning as the UK’s latest Service PMI slid further than expected.
The private sector grew at is slowest pace in five months in February, with activity dropping from 54.5 to 53.3 after initial estimates only pegged a drop to 54.1.
The services decline, alongside a drop in the manufacturing PMI earlier in the week has led Markit –who compiled the data- to suggest that the UK’s first quarter growth will be below 0.4%, a notable drop from 0.7% at the end of last year.
Overall the data does not paint a pretty picture for Britain’s economy over the next twelve months, a particularly worrying situation to be in as the government prepares to trigger Article 50 and start the formal Brexit process.
GBP CAD is likely to soften as markets become increasingly concerned about the UK’s exit from the EU over the next month.
Although there is currently no set date for Article 50 to be invoked, Prime Minister Theresa May has previously stated that she planned to get Brexit negotiations underway by the end of March.
Meanwhile, the Canadian Dollar may rally on Tuesday if the latest Trade Balance shows that country continued to maintain a trade surplus in January.
Current Interbank Exchange Rates
At the time of writing the GBP CAD exchange rate was trending around 1.64 and the CAD GBP exchange rate was trending around 0.60.
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