Pound Canadian Dollar (GBP/CAD) Exchange Rate Hits 21-Month Low on Omicron Concerns

The Pound Canadian Dollar (GBP/CAD) exchange rate dipped during the first half of the week as Covid concerns subdued Sterling sentiment and oil tailwinds buoyed the Canadian Dollar (CAD).

In the second half of the week, GBP recouped some of its losses as the ‘Loonie’ failed to extend its rally, coming under pressure from an underwhelming interest rate decision.

What’s Been Happening: Omicron Dents GBP Prospects, CAD Follows Oil Dynamics

The Pound Canadian Dollar began the week trending down on dovish comments from Bank of England (BoE) policymaker Ben Broadbent. Meanwhile, the Canadian Dollar rallied against its peers on oil prices.

Subsequently, rumours of Plan B Covid measures subdued the Pound (GBP) further; meanwhile, the release of Canada’s trade balance supported the ‘Loonie’, as the country’s surplus exceeded expectations.

Midweek, GBP/CAD hit a 21-month low as Plan B measures seemed set to become a reality – CAD continued to gain on oil price dynamics.

On Thursday, the Pound recouped some of its losses amidst weakness amongst its peers, despite the implementation of Plan B: the ‘Loonie’ faltered as the Bank of Canada (BoC) kept its interest rate on hold.

At the week’s close, the WTI price rally ran out of steam, bolstering the Pound Canadian Dollar exchange rate.

Three Things to Watch Out for This Week

  1. Employment Data

The UK unemployment rate will be released tomorrow, followed by Canadian jobs data on Thursday. A fall in UK joblessness is likely to lend GBP tailwinds, while a decrease in Canadian hires could suppress CAD sentiment.

  1. Inflation

Both Canada and the UK will release inflation data on Wednesday: the former is expected to remain at 4.7% while UK inflation is expected to rise, potentially accelerating BoE tightening measures.

  1. BoE Interest Rate Decision

The Bank of England (BoE) will reveal its interest rate decision on Thursday: the central bank is expected to keep interest on hold amidst Omicron-related uncertainty.

Pound Canadian Dollar Forecast

Alongside this week’s data releases, GBP/CAD is also likely to be affected by external factors such as risk sentiment and oil prices. If fuel demand is forecast to decrease on rising Covid cases and a subsequent slowdown in productivity, the Canadian Dollar may face downside.

Olivia Evershed

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