The Pound Canadian Dollar (GBP/CAD) exchange rate rose over the course of the past week as oil prices rallied and Canadian inflation printed above expectations; although gains were partially lost on USD strength.
The Pound (GBP) found limited support from an increase in average earnings, while high inflation tailwinds were tempered by political uncertainty.
What’s Been Happening: Inflation Exceeds Expectations, Oil Prices Climb
The Pound Canadian Dollar exchange rate fluctuated last Tuesday as UK employment data printed mixed. Average earnings exceeding expectations while unemployment remained 0.6pp higher than before the pandemic.
The ‘Loonie’ pushed higher on Wednesday, boosted by a spike in oil prices, which coincided with higher-than-expected Canadian CPI. UK inflation tailwinds were suppressed as Canada’s inflation rate jumped from 3.7% to 4.1%.
Renewed strength in the US Dollar (USD) and underwhelming Canadian jobs data weighed on CAD through Thursday; the Pound fell likewise on a cabinet reshuffle. After briefly hitting a nine-day high against the Pound on Friday morning, the Canadian Dollar tumbled as WTI crude fell by over $1.
Into this week, GBP/CAD retraces its steps as GBP faces downside pressure amidst a shortage of UK data.
Despite election disruptions, CAD is making strides on renewed strength in oil prices. US supplies are tightening, narrowing the supply-demand ratio, while analysts suggest that global utilities may be switching to fuel oil due to rising gas and coal prices.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The Bank of England (BoE) are forecast to leave interest rates at 0.1%, with no immediate change to their asset purchases. A hawkish tone could boost GBP.
- Canadian Retail Sales
Canadian retail sales are predicted to contract on Thursday afternoon, potentially exerting CAD headwinds.
- WTI Crude Dynamics
As ever, the oil-sensitive ‘Loonie’ is heavily influenced by oil prices. If crude continues to stabilise, CAD may find support.
Pound Canadian Dollar Forecast
The Pound Canadian Dollar exchange rate is likely to trade at the mercy of oil prices until the BoE’s interest rate decision. Thursday may see GBP/CAD rise depending on the central bank’s forward guidance, in addition to Canadian retail data.