GBPCAD could be seeing volatility into the end of the week as the market prepares for the latest UK GDP growth figures and Canadian employment numbers.
GBPCAD– Daily Chart
The pound sterling has recently found support against the Canadian dollar near the 1.61 level to mark a double bottom. The pair has now rallied to 1.63 ahead of the latest data.
Continued pressure on oil has weighed on the Canadian dollar in early 2023 and capped any CAD gains. Crude oil is still struggling to get above the $80 level despite China’s hopes of reopening.
The UK got a boost ahead of its GDP numbers after the prominent think tank, Niesr, said the country should avoid recession. The National Institute of Economic and Social Research said the economy should continue to grow marginally despite high prices affecting household spending. However, the project warned that while the country may not fall into recession, it may not be a positive outlook for at least seven million households.
The 3-month GDP average into December is expected to come in at 0%, to mark a 0.4% increase year-on-year in Q4. That would be down sharply from the previous estimate of 1.9%, and the IMF recently said the UK would fare worse out of the developed nations.
Meanwhile, the chancellor and prime minister are being urged to use the coming March budget to soften the blow of a recent rise in profit taxes, according to the Confederation of British Industry (CBI). Giving businesses incentives to invest in machines and technology tax-free would boost spending on resources and lift the country out of a decade-long growth slump, the CBI said.
Canadian employment is expected to show an additional 15k jobs added in January, compared to 104k for the previous month. The unemployment rate is likely to slip towards 5.1% from 5% despite the new jobs. The Canadian dollar could lose ground against the British pound if we see the numbers edging toward the UK’s favour on Friday. Soft employment is a risk in Canada, while a GDP surprise could continue the current rally in the GBP.
