Canadian growth beats forecasts
Canada’s economic growth data surprised the markets yesterday. Most analysts had expected a sizable drop in the growth rate to 1.5%. However, the annual growth rate to the end of Q3 was 2.9%, nearly double that expectation and only marginally down on the Q2 figure of 3.2%. No surprise then that the Canadian dollar strengthened through the latter part of the day and the GBPCAD rate is down to CAD 1.6215 this morning, having retraced half the losses the CAD suffered ahead of the data release. Part of that decline in this pair was due to sterling having a bad day at the office but more of that is below. We don’t have any Canadian data today and we only have one speaker from the Bank of England on the GBP side of this exchange rate, so Wednesday will likely be less volatile than Tuesday. The caveat to that is that this is the last working day of the month and volatility is inherent within that, due to speculative trades being closed out on a profit-taking basis. As sterling has risen for most of November, there is a very good chance it will lose some ground on that profit-taking.
Sterling flip flops on BOE comments
The governor of the Bank of England, Andrew Bailey was less negative than normal when he spoke yesterday. His comments can be summed up in the phrase he used to describe the Bank’s expectations on interest rate hikes. He said, “our expectation is there will be more to do”. So, with the likelihood of further interest rate hikes against a backdrop of the lowest level of mortgage approvals since June 2020, the markets are right to be confused. Having spiked to $1.2150 at the end of last week, the GBPUSD rate is down to $1.1975 this morning and the GBPEUR rate has followed a similar path, hitting the height of €1.1660 on Thursday and sliding to €1.1550 at the time of writing. The US dollar has found buyers ahead of today’s US GDP data and after a few days of weakness and euro traders are awaiting a flurry of inflation data today. So things should be lively enough to keep everyone active.
US GDP, Beige Book, and a Jerome Powell speech all in one day
The last day of November is going to be a very busy one for US traders. Not only will we have the release of US economic growth data for the third quarter of the year, which is expected to show a minor acceleration in the pace of growth, but we will also have a speech by the chairman of the US Federal Reserve and a regional account of the state of the US economy in the form of the blandly titled Beige Book. In between those events, we will also see data on pending home sales, the volume of job opportunities that exist in the US, and figures on the level of crude oil inventories. All of these items influence the value of the US dollar but having them all arrive on the same day and that day is the last working day of a trading month, means we are assured of some U.S. dollar volatility. Brace yourselves. the general perception is that this data will be positive, on the whole, so some U.S. dollar strength it’s the most likely outcome.