Pound to Canadian Dollar Forecast: GBP/CAD Exchange Rate Advances on BoE Rate Speculation

Potential for a BoE Rate Hike Drives GBP/CAD Exchange Rate Higher

The Pound Canadian Dollar (GBP/CAD) exchange rate climbed by around half a cent last week, largely driven by Bank of England (BoE) rate speculation.

However it wasn’t all plain sailing for Sterling, as it suffered a number of setbacks due to an unexpected uptick in unemployment and a surprise downward adjustment in GDP.

This was not enough to prevent GBP from briefly climbing to a new ten-month high however, as rampant speculation of an incoming rate hike caused investors to flock to the currency.

Meanwhile the Canadian Dollar struggled in mid-week trade last week as domestic retail sales were shown to have plummeted to a disappointing 0.8% in December.

Ultimately however CAD was able to mount a late stage comeback on Friday as Canada’s CPI figures showed that inflation slowed much more modestly in January than economists had forecast.

Canadian Dollar (CAD) Struggles amid Ongoing NAFTA talks

The Canadian Dollar has found itself on the back foot again in the first half of this week’s session as investors weigh up talks to revamp the North American Free Trade Agreement (NAFTA).

This week’s talks are expected to see Canadian, Mexican and US officials attempt to re-work the less contentious chapters of NAFTA.

CAD investors are hopeful that some movement at this stage could lead to a breakthrough in wider talks concerning the trade agreement.

However, with observers still suggesting that Trump is leaning towards scrapping the agreement entirely, markets are not holding out much hope.

With over 75% of Canada’s exports destined for the US the scrapping of NAFTA is likely to have major consequences for the Canadian Dollar exchange rate.

Sterling (GBP) Weakened by Brexit Concerns

Meanwhile the Pound’s own attempts to advance this morning were cut short as renewed Brexit concerns weighed on market sentiment.

After initially advancing the GBP/CAD exchange rate quickly fell back as markets brace for the release of a draft Brexit withdrawal treaty from the EU on Wednesday.

Reports suggest that the treaty may ignore Theresa May’s requests regarding a transitional period, and may anger the UK government over its proposals for the Irish border.

The draft is expected to make no mention of avoiding a hard border between the UK and Northern Ireland as it is seen to be an internal UK matter by the EU, something which may anger coalition partners the DUP, whose votes May needs to prop up her government.

GBP/CAD Forecast: UK Consumer Confidence to Slide?

Looking ahead, UK economic data could weigh heavily on the GBP/CAD exchange rate during this week’s trading session.

This may start with an expected downturn in UK consumer confidence, with the sentiment index in February predicted to have slid from -9 to -10.

Furthermore, the latest PMI figures, which are forecast to show that UK private sector activity remained subdued this month, are even more likely to have an impact.

Meanwhile Canada will publish its latest GDP figures later this week, with the Canadian Dollar likely to rally as economists predict fourth quarter growth will have ticked up from 1.7% to 2%.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail