The latest resurgence in anxiety over Brexit-based tensions over Northern Ireland left the Pound to Canadian Dollar exchange rate on the back foot.
Last Week: Pound Canadian Dollar Exchange Rate Falters as Canadian Unemployment Falls
In the wake of the Bank of Canada’s (BOC) March policy announcement the Canadian Dollar struggled to find much traction against its rivals, with monetary tightening still appearing a distant prospect.
The Pound came under increased pressure ahead of the weekend, meanwhile, thanks to the weakness of January’s UK gross domestic product data.
With the economy still on track to experience a contraction in the first quarter the mood towards the Pound naturally soured, limiting the strength of the GBP/CAD exchange rate.
An unexpectedly sharp decline in February’s Canadian unemployment rate helped to shore up CAD exchange rates, on the other hand, as the rate plunged from 9.4% to 8.2% on the month.
Three Things to Watch out for This Week
1. Canada Inflation Rate
Demand for the Canadian Dollar could pick up further on the back of Wednesday’s release of the latest inflation data, with forecasts pointing towards an uptick.
If the headline inflation rate picks up as anticipated investors are likely to find further reason to favour the Canadian Dollar over its rivals.
2. Bank of England Interest Rate Decision
Additional volatility looks likely for GBP exchange rates in the wake of the Bank of England’s (BoE) March policy announcement.
While no change in monetary policy appears likely at this stage the nature of policymaker commentary could put a fresh dampener on the Pound if the tone proves more dovish in tone.
3. Canada Retail Sales
However, anxiety over the health of the Canadian economy could intensify if January’s retail sales data shows a fresh monthly decline.
As long as consumer spending remains on the decline this may cast fresh doubt over the strength of the economic outlook for the first months of 2021, leaving the Canadian Dollar vulnerable.
GBP/CAD Exchange Rate Outlook
Rising Canadian inflation and any signs of BoE reticence could help to drag the Pound to Canadian Dollar exchange rate lower over the course of the week.