British growth rate stagnated below market expectations, thus underlining the still uneven pace of economic activity globally. To understand more about how this is affecting demand for lower-risk securities, have a look at our last analysis of gold.
Earlier today, the Office for National Statistics in the UK revealed that the British economy grew by one per cent in the last three months of 2021, falling behind the market forecasts. Nevertheless, the pound continues to be advancing steadily.
As can be seen on the 4H chart above, the GBPCAD pair is currently probing the major Resistance Area (in red) just below the resistance at 1.73100. This level has already been tested on three separate occasions in the near past without any decisive breakouts.
That is why the current pullback, underscored by the ascending channel, may struggle below this major threshold. If another reversal were to emerge from it, the subsequent correction could head towards the 23.6 per cent Fibonacci retracement level at 1.71562. The 38.2 per cent Fibonacci at 1.70578 represents a deeper target for the correction.
The likelihood of such a reversal developing next is substantiated by the current reading of the MACD indicator, which seems to point to the early stages of a potential divergence in the making. This is demonstrated by the increasingly smaller waves of the indicator.
Economic activity in the UK grew by 1.0 per cent in Q4, the same as the recorded performance in the previous quarter. Meanwhile, the preliminary forecasts were anticipating a slightly bigger rate of expansion, reaching 1.1 per cent.
This data comes after BOE's hawkish decision to lift the Official Cash rate last week, which was partly justified by the pace of economic expansion that was being observed so far.