The Pound to Canadian Dollar exchange rate has experienced heavy fluctuations over the last week due to mixed news from both the UK and Canada. While Sterling jumped on multiple occasions last week, a relatively hawkish Bank of Canada (BOC) left GBP/CAD below the key level of 1.73. At the time of writing, the pair fluctuated in the region of 1.7170.
Pound Struggles to Hold Ground after Recent Rally
Last week’s session saw Sterling soaring across the board in response to a series of unexpected economic and political developments. Firstly, the sudden appointment of Theresa May as the UK’s new Prime Minister caused a drop in the UK’s political uncertainty, boosting the Pound.
The Bank of England’s (BoE) first post-Brexit meeting boosted the Pound further still on Thursday. The bank was widely expected to introduce easing policies and rate cuts, but instead left policy frozen until August’s meeting.
Last week ultimately proved to be one of Sterling’s greatest rallies in months, but the currency was unable to recover to pre-Referendum levels, instead reaching levels last seen in the final week of June.
Positive UK Inflation Fails to Send Sterling Higher
Investors brought the Pound higher still on Monday on the surprising news that Japanese communications company, Softbank, had bought UK tech firm ARM Holdings in its entirety.
The £24bn deal boosted business confidence in and outside of the UK, as it sent a message that UK investments were still appealing to large companies despite Brexit anxieties.
Some analysts speculate that this trend could continue if the Pound’s low value makes UK business deals cheaper for foreign buyers.
However, Monday marked the end of the Pound’s rally as investors sold the currency from its highs on Tuesday, despite UK inflation printing above expectations in June.
Canadian Dollar Flounders on Low Risk Sentiment
The Canadian Dollar has struggled to sustain many advances over the last week. Prices of oil, Canada’s most lucrative commodity, have struggled to return to US$50 per barrel since the Brexit vote due to market jitters and a supply glut, undermining confidence in the commodity.
The ‘Loonie’ saw a brief session of more comfortable trading last Wednesday, when the Bank of Canada (BOC) took a more hawkish-than-expected tone in its July policy decision.
However, the optimism failed to last as oil prices continued to struggle, heavily weighing on the appeal of the commodity-correlated Canadian Dollar and making other commodity currencies more appealing by comparison.
Oil prices remained low into the new week, with the ‘Loonie’ also being hit by a shift in risk sentiment. Bets that Australia’s and New Zealand’s central banks would cut their nations’ key interest rates in August and optimistic US economic data saw investors turn to USD on Tuesday.
GBP/CAD Forecast: Both Currencies to Remain Pressured
The Pound to Canadian Dollar exchange rate is likely to continue fluctuating this week as both the UK and Canada publish several influential releases.
UK employment data is due on Wednesday, followed by retail sales on Thursday and July’s preliminary UK PMI scores on Friday. As these figures may serve as an indication of the health of the UK economy since the Brexit vote, investors will likely focus their attention here.
As for Canada, the low prices of oil are unlikely to recover in the coming week as oversupply concerns continue and forecasts remain relatively grim.
Key Canadian data due on Friday may provide the ‘Loonie’ with relief if it beats expectations. May’s retail sales scores and June’s Consumer Price Index (CPI) figures are set to be released during Friday’s session.
As it stands, GBP/CAD is unlikely to make any considerable movements in the coming week as both currencies remain heavily pressured by domestic worries.