GBP/CAD is recovering on Wednesday after losing 1.52% yesterday. Currently, one British pound buys 1.7749, up 0.22% as of 11:00 AM UTC.
Pound Strengthens Despite Bearish Fundamentals
Interestingly, the pound is dominating the pair even though the UK released disappointing GDP data and the Bank of England (BoE) unexpectedly cut the interest rates from 0.75% to 0.25%.
The British economy was flat in January, denying other signs that pointed to a rebound supported by Prime Minister Boris Johnson’s major victory in the December election. The Office for National Statistics (ONS) said earlier today that the economy showed zero growth in January, while analysts predicted an increase of 0.2%. In the three months to January, the economy was also flat, while economists polled by Reuters expected a 0.1% expansion. In annual terms, the GDP growth accelerated by 0.6% in January.
Investors hoped that the uptick in business and consumer confidence after Johnson’s victory would contribute to the GDP’s acceleration, but that was not the case. ONS statistician Rob Kent-Smith commented:
“Growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars and machinery industries. The dominant service sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education.”
The ONS data showed that the UK’s services industry, which dominates the economy, grew by 0.1% in January compared to December. Industrial output declined by 0.1% but manufacturing increased by 0.2%.
Separately, the ONS also presented trade data, which showed that Britain saw a goods deficit at 3.270 billion pounds, which is smaller-than-usual for the third consecutive month. The measure was dragged down by volatile exports of precious metals like gold. Excluding oil and volatile items, the goods trade deficit was at 8.248 billion pounds.
Earlier today, the BoE surprisingly cut the interest rate by 0.50% ahead of the normal schedule in an emergency move. The central bank is trying to fight the economic repercussions of the coronavirus outbreak.
However, the dovish stance didn’t intimidate the sterling, which continues to recover against the Canadian dollar. The latter is currently under pressure amid declining oil prices.
