After trading flatly at the beginning of the week, the Pound to Canadian Dollar exchange rate dipped in response to Tuesday’s UK inflation report.
Pound (GBP) Tumbles as Inflation Weighs on BoE Rate Hike Expectations
It now seems even more unlikely that the Bank of England (BoE) will adjust UK monetary policy any time soon, with the UK’s latest inflation report giving the central bank some breathing space by coming in below-forecast.
Britain’s July Consumer Price Index (CPI) was forecast to increase slightly from 2.6% to 2.7% year-on-year, but remain at 0% month-on-month.
The inflation data fell short in both prints however, staying at 2.6% year-on-year and contracting -0.1% month-on-month.
With the results doing little to support hopes that the BoE will adopt a more hawkish approach to monetary policy in the near future, the Pound eased lower against currencies like the Canadian Dollar.
Canadian Dollar (CAD) Investors Await Key Data
Although the Pound was left struggling on Tuesday, a lack of influential domestic news and commodity price developments meant the Canadian Dollar was unable to really capitalise on the lack of demand for Sterling.
Prices of oil, Canada’s key commodity, approached a three-week low on Monday amid concerns that Chinese demand for the commodity will ease while US production levels increase.
GBP CAD Forecast: UK Wage Data Ahead
There is potential for the Pound to Canadian Dollar exchange rate to recover today’s slight losses after the UK’s employment figures are published on Wednesday. Of particular focus will be Britain’s wage growth report.
Analysts expect average earnings excluding bonuses to remain at around 2%. A forecast-beating result could help bolster consumer spending and brighten the UK’s economic outlook.
If wage growth falls short, however, GBP/CAD could soften.
While UK retail sales and Canadian manufacturing sales results could influence GBP/CAD slightly on Thursday, Friday’s Canadian inflation results will also be of interest this week.
Canadian inflation is forecast to have ticked higher in July, a result which could be CAD positive.