GBP/CAD continues to decline on Monday for the fourth session in a row, and it seems there is no chance for the pair to close the day in green. Currently, the pair is trading at 1.6942, down 0.60% as of 10:40 AM UTC.
The pair turned bearish last week, when Bank of England (BoE) Governor Mark Carney, followed by other policymakers, suggested that the central bank would cut the interest rates if the economic growth continues to be sluggish. In light of this, investors waited for the gross domestic product (GDP) data that came out recently.
The British economy surprisingly tumbled ahead of the general election, adding to concerns that there was no growth at all in the fourth quarter. The Office for National Statistics (ONS) said that the GDP declined by 0.3% in November, while economists anticipated zero change. The bad news is that the GDP requires growth of 0.1% to 0.2% in December to avoid contraction in the fourth quarter.
ONS’ head of GDP Rob Kent-Smith commented:
“Long term, the economy continues to slow, with growth in the economy compared with the same time last year at its lowest since the spring of 2012.”
Accordingly, markets have increased the chances for a rate cut by the BoE, which might consider the easing measures sooner than later.
The British economy has slowed mainly because of the Brexit uncertainty. The dominant services sector contracted 0.3% in November, the biggest decline since early 2018. Elsewhere, industrial production dropped 1.7% over the month, against an expected decline of 0.3%. The drop in manufacturing output was driven by carmakers shutting down to avoid supply disruptions around the previous Brexit deadline set for October 31. Auto output tumbled more than 6%. The best performer was the construction industry, which rose 1.9%, bouncing back from a weak October.
The trade deficit narrowed in November, with imports tumbling by almost 12%. The deficit fell to 5.3 billion pounds.
The good news is that the surveys carried out after the election won by Prime Minister Boris Johnson point to a boost in confidence, though it remains to be seen if momentum can be maintained.
