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UK, US GDP figures ahead, weak inflation may dent CAD

business-articlesUK, US GDP figures ahead, weak inflation may dent CAD
  • Robust growth figures may support GBP
  • US GDP predicated to slip
  • Canadian inflation expected to slide
GBP may firm on robust GDP figures

The pound may be able to further build on this week’s gains with the release of the UK’s GDP figures later this morning.

The figures are expected to report that UK economic growth held at 0.4% in the fourth quarter, with some economists even going so far as to forecast it may have even ticked up to 0.5%.

The robust reading at the end of the year may bolster the pound as it likely supports suggestions that the UK economy has not been as negatively impacted by Brexit as some investors initially feared.

However at the same time the annualized figures are expected to show that year-on-year the UK’s economic growth slowed from 1.7% to 1.4% in 2017, something that may take a little of the spring of out Sterling’s step.

US growth forecast to slow in Q4

The US will also publish its fourth quarter GDP figures later this afternoon, although the US figures may be less supportive for the domestic currency than the UK’s data.

Analysts currently predict that US economic growth will have slowed from 3.2% to 3% at the end of last year.
While this would be a reasonably robust reading and ahead of the 1.8% growth seen at the same point last year, it would leave GDP below the long-term average of 3.2%.

However investors may be pleasantly surprised if any solid US service sector activity seen in the fourth quarter actually supports an uptick in growth as it did in the third quarter.

CAD poised to tumble on possible dip in inflation

The Canadian dollar is likely to relinquish ground later this afternoon, with the release of Canada’s latest consumer price index (CPI).

Economists forecast that the figures will show domestic inflation slipped from 2.1% to 1.9% in December as crude prices fell back at the end of 2017.

However core inflation – which strips out volatile items such as food and fuel - is expected to have ticked up from 1.3% to 1.5% last month, something which may help to prevent any major losses for CAD.

The Bank of Canada (BoC) is likely to pay close attention to domestic inflation figures after voting to raise interest rates three times in the last six months. Any signs that inflation is falling mean it is unlikely the bank will hike rates again anytime soon.

Upcoming Data

Friday, 26 January, 2018
09:30                     GBP GDP Q4
13:30                     USD GDP Q4  
13:30                     CAD Inflation Rate
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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