The Pound to Canadian Dollar (GBP/CAD) exchange rate climbed to a two-month high last week, on the back of optimism over a new coronavirus vaccine.
What’s Been Happening: Pound Jumps on Vaccine Optimism
After a slow start, the Pound struck higher against the Canadian Dollar through last week’s session, largely in thanks to US pharmaceutical giant Pfizer and its announcement that its experimental coronavirus vaccine has shown 90% effectiveness.
The announcement appeared to particularly benefit Sterling given the damage the pandemic has wrought on the UK economy.
However, it wasn’t all plain sailing for the Pound as the GBP/CAD exchange rate met some friction in the latter half of the week after the UK’s third quarter GDP estimate printed below expectations.
Meanwhile, the commodity-linked Canadian Dollar initially skyrocketed last week, as the coronavirus vaccine announcement triggered a surge in oil prices.
However, this oil rally quickly ran out of momentum, leaving the ‘Loonie’ vulnerable to losses against a resurgent Pound in the latter half of the week.
Three Things to Watch Out for This Week
1. Brexit Developments
The key focus for this week looks to be the ongoing trade talks between the UK and EU as the two sides attempt to finalise a Brexit trade deal before this week’s EU summit. Expect the Pound to face some headwinds if no breakthrough is found.
2. UK Inflation Figures
Also influencing Sterling sentiment will be the publication of the UK’s consumer price index (CPI), but will a modest rise in inflation be enough to provide any meaningful gains for GBP?
3. Canadian Inflation Figures
The publication of Canada’s own CPI figures will be in the spotlight for CAD investors this week as another negative monthly reading is likely to put some pressure on the Canadian Dollar
The GBP/CAD exchange rate looks likely to struggle to maintain its upward momentum this week as Brexit uncertainty will cast a long shadow over the Pound.