The Pound Canadian Dollar (GBP/CAD) exchange rate peaked last week at its highest levels since 23 April. Positive Bank of England (BoE) comments supported the Pound (GBP), alongside optimism over Covid booster shots.
The Canadian Dollar (CAD) recouped some of its losses ahead of the weekend and through yesterday’s session, as UK GDP printed poorly and oil prices stabilised.
What’s Been Happening: BoE Consider Tapering; CAD Rises on Oil Prices
The Pound gained against the Canadian Dollar last Tuesday, despite Prime Minister Boris Johnson’s confirmation of a tax rise. Falling oil prices subdued the ‘Loonie’, alongside a lack of significant data.
Into Wednesday, confidence over Covid booster shots and optimism from BoE Monetary Policy Committee member Dave Ramsden supported the Pound. On Thursday, however, CAD reversed its losses and climbed against GBP. Investors’ spirits may have been buoyed by hawkish comments from the Bank of Canada (BoC)’s Tiff Macklem.
Into Friday, oil prices rose, lifting the Canadian Dollar higher against Sterling. Poor UK GDP data exerted downside pressure on the Pound; although GBP managed to recoup some losses in the afternoon.
The Pound dipped in yesterday’s session, as a lack of data subdued GBP sentiment – but is rising this morning alongside strong employment figures.
Three Things to Watch Out for This Week
- Inflation Data
The UK and Canada will print inflation data tomorrow: both countries are expected to report a rise, with UK inflation posting the biggest gains.
- Canadian Employment
On Thursday, Canada publishes its ADP employment change figures: the country is expecting to have added 180K new jobs.
- UK Retail Sales
UK retail sales data on Friday is expected to show a 0.5% rise in sales volumes, after contracting in July. If figures meet expectations, GBP could enjoy tailwinds.
Pound Canadian Dollar Forecast
Inflation data is likely to be the most influential stimulus this week; while the UK is set to publish the largest rise, Canadian inflation still looks to remain higher at 3.9%. Markets could interpret either release bullishly.
Meanwhile, oil prices are likely to affect CAD trading direction, while any political concerns could dent GBP’s prospects.