GBP/CAD is still in the bearish territory on Tuesday, even though mixed UK gross domestic product (GDP) data lifted the pair. Currently, one British pound buys 1.7180, down 0.08% as of 10:50 AM UTC. The pair touched the daily low at 1.7152 in the morning, but it suddenly surged after GDP data was released. The chances are that the pound will manage to post a slight daily increase against the CAD when the session closes
The Office for National Statistics (ONS) said that Britain’s economy had shown zero growth in the final three months of last year compared with the previous quarter. Nevertheless, the major victory of UK Prime Minister Boris Johnson led to signs of recovery early in 2020.
Rob Kent-Smith, the ONS’s head of GDP, commented:
“There was no growth in the last quarter of 2019 as increases in the services and construction sectors were offset by another poor showing from manufacturing, particularly the motor industry.”
Year on year, the GDP growth was 1.1%, which is slightly stronger than analysts’ expectations of 0.8% growth.
The quarterly increase in consumer spending was the slowest since 2016, rising only 0.1%. The household spending has supported the UK’s economy for most of the period since the Brexit referendum.
Business investment fell 1.0% over the quarter, the biggest decline since late 2016.
Manufacturing output dropped for the same period by 2.5% compared to Q4 2018, which is the largest decline in seven years. The indicator was dragged down by carmakers shutting down their plants in November amid fears of a no-deal Brexit.
All in all, the markets ignore the weaker-than-expected manufacturing data and argue that the uptick in GDP growth at the end of 2019 would be enough for the Bank of England to hold the rates unchanged at its next meeting.
Moreover, there are early signs that the economy is improving in the first quarter of 2020, even though the opinions over sustained growth are mixed.
Howard Archer of EY Item Club stated:
“Business and consumer confidence have clearly improved early on in the first quarter of 2020, and the overall impression is that this has led to some improvement in economic activity. However, with little hard data available so far, it is hard to judge just how much the economy is picking up and whether this can be sustained.”
