The Pound Canadian Dollar (GBP/CAD) exchange rate largely trended lower last week as Russia invaded Ukraine.
What’s Been Happening: Pound Canadian Dollar Fluctuates in response to Ukraine Crisis
The Pound Canadian Dollar exchange rate began the week’s session on strong footing, after the UK’s services PMI beat market forecasts.
February’s preliminary figures printed at 60.8, beating the predicted 55.5 and significantly higher than the previous 54.1.
Meanwhile, the commodity-linked CAD was weighed on by volatile oil markets on Monday.
By Tuesday morning however, crude oil reached a 7-year high bolstering the ‘Loonie’.
Following a dip on Tuesday afternoon, oil prices then regained traction and remained high throughout the rest of the week’s session. This was after the Ukraine crisis escalated into a ‘full-scale’ invasion by Russian forces.
On the other hand, the Pound struggled against the majority of its peers by midweek due to geopolitical uncertainty.
Adding to GBP pressure, Bank of England’s (BoE) Deputy Governor, Dave Ramsden, delivered a dovish speech.
BoE Governor, Andrew Bailey, then echoed this dovish approach, calling on markets ‘not to get carried away’ with pricing in aggressive interest rate hike bets.
At the end of the week, the GBP/CAD exchange rate extended its losses as Russia’s invasion of Ukraine continue to rattle markets.
Three Things to Watch Out for This Week
1. Ukraine Crisis
The Russia-Ukraine war will remain the key catalyst for GBP/CAD exchange rates this week. Whilst the Pound may struggle as a result of heightened geopolitical uncertainty, the Canadian Dollar could be supported by higher oil prices.
2. BoC Interest Rate Decision
On Wednesday, the Bank of Canada (BoC) is expected to hike interest rates from 0.25% to 0.5%. This is likely to further underpin the ‘Loonie’s, particularly if the bank’s foreward guidance hints at more rate hikes to come.
3. BoE Speeches
A number of BoE policymakers are scheduled to speak this week. Should they strike a broadly dovish tone then the Pound may stumble.
Pound Canadian Dollar Forecast
Looking ahead, will Russia’s invasion of Ukraine continue to strengthen oil prices and cause pressure on the Pound Canadian Dollar exchange rate?