The Pound to Canadian Dollar (GBP/CAD) exchange rate trended higher last week on the back of some positive UK coronavirus statistics, before upbeat Canadian inflation helped the ‘Loonie’ to claw back a good portion of its losses.
What’s Been Happening: Canadian Dollar Rallies on Inflation and GDP Data
The Canadian Dollar (CAD) faced headwinds at the beginning of the week on lowering oil prices. WTI crude futures fell toward $71 per barrel on Monday.
The ‘Loonie’ found support on Wednesday, however, as inflation settled at 3.1%, while Friday’s GDP release contracted by only 0.3%, as expected.
Although missing expectations, inflation data buoyed CAD confidence. GDP figures sustained tailwinds, as US Dollar weakness bolstered CAD’s appeal.
The Pound started the week well, as UK coronavirus cases fell for the sixth consecutive day. Which alongside some fresh Brexit optimism propelled Sterling sharply higher in the first half of the week.
The GBP/CAD exchange rate fell back from its best levels in the latter half of the week however, as a rise in coronavirus cases left Sterling vulnerable to a resurgent ‘Loonie’.
Three Things to Watch Out for This Week
- Coronavirus Headlines
While domestic headlines appear optimistic, a renewed rise in infections warns against complacency. The Prime Minister retains a cautious tone on international travel, his bearish stance threatening to weigh upon the GBP/CAD exchange rate.
- Bank of England (BoE) Interest Rate Decision
Driving Sterling this week will be Thursday’s Bank of England (BoE) interest rate decision. Interest rates are forecast to remain on hold at 0.1%, with forward guidance expected to reiterate that further ‘significant progress’ is needed before tapering will be considered.
- Oil Prices
As ever, CAD will be influenced by the price of oil. Coronavirus curbs and slowing factory activity threaten to weigh upon sentiment, as WTI Crude fell by 16 cents per barrel this morning.
Pound Canadian Dollar Forecast
Looking ahead, this week could see the GBP/CAD exchange rate drop if the BoE strikes a dovish tone following its latest policy meeting.