Pound to Canadian Dollar Outlook: GBP/CAD Sinks After Strong Canadian Jobs Data

January 12, 2025 - Written by David Woodsmith

STORY LINK Pound to Canadian Dollar Outlook: GBP/CAD Sinks After Strong Canadian Jobs Data

The Canadian dollar strengthened after stronger than expected Canadian jobs data.

Higher US bond yields also triggered another round of Pound selling in global markets.

In this environment, the Pound to Canadian dollar (GBP/CAD) exchange rate dipped to 6-week lows at 1.7600 before stabilising.

The latest Canadian labour-market data recorded a net increase in employment of 90,900 for December compared with consensus forecasts of around 25,000 and followed a 50,500 increase the previous month.

The unemployment rate edged lower to 6.7% from 6.8% and compared with expectations of a further small increase to 6.9%.

The stronger than expected jobs data dampened expectations of further aggressive Bank of Canada interest rate cuts.

Although a further cut is still expected this month many investment banks then expect a pause.

According to CIBC; "Overall, today's report is clearly better than anticipated, although the unemployment rate is still elevated and indicative of slack within the economy, and we still see the need for further interest rate cuts to fully reduce that excess capacity."

The Pound continued to struggle in global markets while uncertainty surrounding Bank of England policy has also increased.

Three-month risk reversals indicated the most negative sentiment since the beginning of 2023.

Rabobank chief strategist Jane Foley commented; "We are in the process of repricing sterling and UK assets for worse growth, a worse budget and a less stable political outlook than we had hoped for, say, in the middle of last year.”

She added; "We'd seen this pressure building and when we had the headlines about the 30-year high since 1998, I think it just gave it more momentum.”

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TAGS: Pound Canadian Dollar Forecasts