Exchange rates for the British pound (GBP) rise as a result of market optimism
As worries over US-China ties subsided, the risk-taking mood on international markets brightened and the upbeat mood in Asian markets spread to the European market. After the US shot down a balloon that entered American airspace believed to be a Chinese surveillance balloon, the markets were concerned about the tensions between the two countries. These concerns, however, vanished when President Biden said that the incident had not significantly affected the US-China diplomatic relationship.
Investors in GBP Express Hope for the UK Economy
Additionally, following a study from the National Institute of Economic and Social Research, GBP investors expressed optimism for the UK economy (NIESR). The think tank predicted that the UK is “likely to escape” a recession this year in its most current economic forecast. The British Pound gained on Thursday’s trading as a result of this optimism.
Exchange rates for the Canadian Dollar (CAD) are stagnant owing to a lack of support
The Canadian Dollar, on the other hand, was unresponsive on Thursday as a result of the “Loonie’s” favorable trading association with the US Dollar (USD). Due to the risk-taking market sentiment and a little decline in US Treasury rates, which hurt the CAD, the safe-haven USD declined. In addition, after rising on Tuesday, the rates on Canadian government bonds decreased on Thursday, continuing their downward trend.
UK’s Recession Status in 2022: GBP/CAD Exchange Rate
Investors in GBP are keenly following the most recent GDP figures for the UK in the future. Insight into whether the UK economy entered a recession last year will be provided by the release of the monthly GDP figures for December and the preliminary fourth-quarter findings for the UK GDP growth rate. The UK will have averted a recession if the results meet or exceed predictions. However, the Pound is expected to come under selling pressure if the GDP comes in below expectations and has two consecutive quarters of negative growth.
The Canadian Labor Market Report Will Affect the CAD
The most recent employment market data for Canada is anticipated to be issued on Friday afternoon. The country’s unemployment rate is now forecast to rise from 5% to 5.1%, despite an anticipated fall in the participation rate, according to experts. A worsening of the Canadian labor market, which can have an impact on the CAD, would be indicated if the unemployment rate increases while the participation rate falls. Additionally, experts forecast that in January, the average hourly wage will fall significantly from 5.2% to 4.4% year over year, which should allay worries about the impact of secondary inflation and reinforce thoughts that the Bank of Canada (BoC) has finished its tightening cycle.