Pound Canadian Dollar (GBP/CAD) Exchange Rate Rockets on BoE Optimism

The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated through most of last week as Sterling faced headwinds over rising energy prices and Brexit. Meanwhile, the Canadian Dollar (CAD) enjoyed tailwinds against the majority of its peers as WTI prices hit a seven-year high.

On Friday, the Pound (GBP) jumped against CAD as hints of a 2021 rate hike from the Bank of England (BoE) buoyed Sterling.

What’s Been Happening: Energy Crisis Subdues GBP; CAD Climbs on Oil Prices

GBP/CAD traded in a narrow range at the beginning of last week as the Pound was subdued by energy crisis headwinds, alternately finding support on upbeat comments from BoE officials.

CAD climbed briefly as oil prices rose through Tuesday and employment data continued to support the ‘Loonie’. The Pound suffered as inflammatory remarks over the Northern Ireland protocol risked UK-EU tensions.

Midweek, oil prices fell initially before rising again; investors speculated over potential monetary policy tightening from the Bank of Canada (BoC). GBP retained the upper hand as UK GDP climbed for August.

The Pound fell against CAD towards the end of the week as energy price concerns resumed, while oil prices continued to support the Canadian Dollar. On Friday, GBP/CAD shot up as speculation over a 2021 rate hike from the Bank of England buoyed investors’ spirits.

Some gains have been retained into this week, as the ‘Loonie’ is subdued by inflation concerns.

Three Things to Watch Out for This Week

  1. Inflation

Both the UK and Canada will release inflation data on Wednesday: increasing inflation may support central bank policy tightening.

  1. Retail Sales

On Friday, retail sales data will print for both countries. Increased sales will likely buoy trading sentiment.

  1. UK PMI Data

Friday will also reveal UK PMI data: sales and manufacturing activity are expected to decline, potentially exerting headwinds.

Pound Canadian Dollar Forecast

The Pound Canadian Dollar exchange rate will likely be influenced by oil prices and central bank dynamics, in addition to CA employment data.

Hawkish signaling from either the BoE or BoC is likely to buoy the respective currency, although ongoing inflationary pressures in Canada may subdue CAD trading.

Olivia Evershed

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