GBP/CAD Advances Within Descending Channel

GBP/CAD is advancing on Wednesday, though the trading volumes are very low on Christmas Day. Currently, the pair is trading at 1.7068, up 0.16% as of 11:20 AM UTC. The pound started to recover late on Monday, but it’s still moving inside a bearish channel. If it manages to break above the 1.7133 level, then we might speak about a trend reversal.

The pound has strengthened against the Loonie after Statistics Canada released gross domestic product (GDP) data. Canada’s economy surprisingly declined by 0.1% in October, which is the first monthly drop since February. The monthly slowdown was partly caused by a US auto strike that affected manufacturing.

Economists polled by Reuters expected the Canadian economy to gain 0.1% over the month, after a 0.1% increase in September.

Goods-producing industries fell0.5% loss, while service sectors remained unchanged. The manufacturing sector dropped by 1.4%, which is the fourth decline in five months. Durable manufacturing contracted by 2.3%, mainly because of a strike by the United Auto Workers, which forced some Canadian plants and parts manufacturers to cut production.

Canada’s latest GDP figures reflect the recent series of disappointing economic indicators that might put pressure on the central bank to consider a rate cut. TD Economics executive Brian DePratto commented:

“Today’s report may be seem easy to dismiss on its face given the strike-related disruption was well known in advance, but moving past that impact reveals some concerning weaknesses. Don’t write off monetary easing in 2020 just yet.”

The last time when Canada cut its benchmark interest rate was in October 2018. The Bank of Canada hasn’t followed its US and European counterparts in deploying easing measures.

Nevertheless, when investors come back from holidays, the Loonie will likely extend its gains against the sterling, especially amid increasing oil prices.

Also, the Canadian will react to the optimism around the US and China trade deal. Yesterday, US President Donald Trump said that he and Chinese President Xi Jinping would have a signing ceremony. Earlier today, China confirmed that it was in close touch with the US on the ceremony.

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