GBP finds buyers on positive GDP data
The financial markets were fairly convinced the economic growth data for January would confirm their worst fears; that the UK is heading into a recession. They’ll be eating those words for breakfast after the data showed 0.3% growth in January. That didn’t wipe out the 0.5% contraction in December but it is better than a poke in the eye with a sharp stick. Sterling found some buying interest in early trade and it has made gains across the board. The GBPUSD rate is up to $1.1940, a cent above its Thursday starting prices and the GBPEUR rate is up to €1.1270 again. Sterling is looking healthier elsewhere too; the GBPAUD rate is up to AUD 1.8120 and GBPNZD is up to NZD 1.9565 for the first time this month. Sterling looks even more robust against the Canadian dollar. After the dovish tone from the Bank of Canada yesterday, this pair is up to CAD 1.6525 for the first time since January. Undoubtedly the pound would be stronger were it not for contractions in both industrial and manufacturing production data.
Banking concerns and employment data rattle USD
SVB Financial Group, a tech-oriented US bank, announced it was selling $1.8 billion worth of securities to cover an outflow of deposit funds, and that spooked the US stock markets yesterday. The 4 largest US banks shed $52 billion in value as their shares took a major hit. That has rattled the US dollar a little and the anticipation of the US jobs report is also causing some concern. Yesterday’s weekly fresh jobless claims came in at 211,000, significantly above market expectations. That has made traders second guess their thoughts on the monthly data, due for release at 13:30 GMT. Whilst no one is expecting the unemployment rate to have moved from 3.4%, there is every chance the pace of job creation will have slowed and that calls into question whether the Federal reserve can legitimately continue hiking the US base rate apace. For now, the GBPUSD rate is roughly a cent higher at $1.1940 and the EURUSD rate is up too at just below $1.06.
CAD weaker on BOC and negative unemployment data expectations
The Bank of Canada’s decision to keep their base rate on hold has weakened the Canadian dollar, as we expected. It is also being held back by an expectation that this afternoon’s Canadian employment data will be soft. The markets believe the unemployment rate will have risen to 5.1% and that only a few thousand new jobs will have been created in February. If that data proves worse than expected, we can easily see the GBPCAD rate rising towards the January high of CAD 1.6675 and maybe even the December peak of CAD 1.6735.