Pound Canadian Dollar (GBP/CAD) Exchange Rate Fluctuates, Pressured by UK Political Turbulence

The Pound Canadian Dollar (GBP/CAD) exchange rate wavered throughout last week’s session amidst UK political jitters.

Meanwhile, CAD was bolstered at the beginning of the week by upbeat an upbeat business outlook survey and strong inflation, however was weighed on as oil prices slumped midweek only to firm by the end of the session.

What’s Been Happening: Political Jitters Places Pressure on Sterling

The Pound Canadian Dollar exchange rate fluctuated at the start of last week, as UK political uncertainty, coronavirus developments, oil prices and mixed data infused volatility into the pairing.

As the Canadian Dollar was lifted by Bank of Canada (BoC)’s upbeat business outlook survey – which reached a record high of 5.99 – prevailing headlines surrounding Boris Johnson’s position as PM continued to undermine the Pound.

By midweek, the Pound remained under pressure as inflation overtook November’s real wages, however this supported rate hike bets and capped GBP’s losses. Meanwhile, the ‘Loonie’ also benefitted from strong inflation as it printed at 4.8%, above the forecast 4.7%.

Nearing the end of the week, Sterling was boosted by Johnson’s announcement that the Plan B restrictions in England were to be lifted from next week, however the ongoing political uncertainty and disappointing UK retail sales for December limited GBP’s gains.

At the same time, the ‘Loonie’s appealwas buoyed by rising crude oil prices.

Into this week, weak UK PMI figures have dampened the Pound’s potential, and expectations regarding oil price improvement is supporting the Canadian Dollar.

Three Things to Watch Out for This Week

1.            Bank of Canada Releases

On Wednesday, the BoC will deliver its latest interest rate decision. While no policy changes are expected from the bank this month will some hawkish forward guidance help to propel CAD higher?

2.            Oil Prices

The commodity-linked Canadian Dollar will also remain susceptible to changes in oil prices. Higher demand in oil will boost the ‘Loonie’.

3.            UK Politics

Sue Gray’s report into the ‘Partygate’ scandal is thought to be released this week. Should a negative report be printed, Johnson may face a vote of no confidence which will cause Sterling to struggle.

Pound Canadian Dollar Forecast

Looking ahead, the GBP/CAD exchange rate today may continue to fluctuate this week amid UK political headlines and the BoC’s latest interest rate decision.

Bethany Uren

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