With both Scotland and England returning to lockdown once again the GBP/CAD exchange rate was left on the back foot, dragged down by renewed economic anxiety.
Last Week: Pound Left Vulnerable as Brexit Deal Relief Fades
As the impact of the eleventh hour UK-EU trade agreement faded the Pound struggled to find much traction against its rivals at the start of 2021.
The start of the UK rollout of the AstraZeneca Covid-19 vaccine offered the GBP/CAD exchange rate a temporary boost, although this was rapidly overshadowed by fresh lockdown concerns.
With the economy already struggling in the wake of the November lockdown and damage to the service sector fears of another underwhelming quarter of growth picked up.
As markets awaited the outcome of the latest set of OPEC+ talks the Canadian Dollar found support, meanwhile, on bets that production will remain capped for the time being.
Three Things to Watch out for This Week
1. UK Services PMI
Confirmation that the UK service sector remained in contraction during December could see the Pound shedding fresh ground.
Unless the finalised PMI can deliver an upside surprise worries over the outlook of the service sector look set to keep the GBP/CAD exchange rate biased to the downside.
2. Canada Balance of Trade
The Canadian Dollar could find fresh support on Thursday with the release of November’s balance of trade report, with forecasts pointing towards a narrowed deficit.
As long as trade conditions show signs of improvement during the final months of the year this could encourage hopes of greater Canadian economic resilience.
3. Canada Unemployment Rate
However, if December’s unemployment rate shows an uptick on the month the may give the GBP/CAD exchange rate a leg up ahead of the weekend.
Signs of increasing labour market weakness could encourage investors to sell out of the Canadian Dollar, betting against the prospect of a wider economic deterioration.
Unless Canadian data points towards any domestic weakness the GBP/CAD exchange rate may struggle to find a rallying point in the coming week as lockdown anxiety dominates.