The Pound Canadian Dollar (GBP/CAD) exchange rate trended downward last week as Russia advanced further into Ukraine.
What’s Been Happening: Pound Canadian Dollar Loses Ground in Response to Russia-Ukraine War
The Pound Canadian Dollar exchange rate began last week’s session rangebound as CAD investors awaited the of Bank of Canada’s (BoC) latest interest rate decision, whilst an absence of UK data left Sterling susceptible to market sentiment.
Russian and Ukrainian officials met to discuss the Ukraine crisis in hopes of finding a diplomatic solution. Unfortunately the talks weren’t successful, with Russian military advancing towards Kyiv by Tuesday, weighing on GBP.
At the same time, UK manufacturing PMI printed at a seven-year high. However, Bank of England’s (BoE) policymaker, Michael Saunders delivered a broadly dovish speech which overshadowed the upbeat data and placed pressure on the Pound.
CAD accelerated on the back of strong oil prices but a variety of weak economic data dampened the ‘Loonie’s appeal: December’s GDP revealed domestic growth stalled.
By midweek, BoC increased interest rates to 0.5% from 0.25%, as expected, which supported CAD, whilst the return of risk appetite buoyed GBP.
At the end of the week, Sterling was capped by geopolitical tensions driving a risk off sentiment.
Meanwhile, CAD benefitted from Brent crude oil prices which reached an eleven-year high, though the ‘Loonie’s demand was eased by reports of a possible return of the 2015 Iran nuclear deal.
Three Things to Watch Out for This Week
1. Russia-Ukraine War
Geopolitical developments are likely to remain the key influencer for the foreseeable future. Should the recent uptrend in oil prices remain in place this is likely to boost CAD.
2. UK GDP
The UK’s GDP for January is forecast to increase from -0.2% to 0.2%. If predictions run true, it may buoy GBP exchange rates.
3. Canadian Unemployment Rate
The Canadian unemployment rate for February is forecast to slip from 6.5% to 6.2% which may weigh on the ‘Loonie’.
Pound Canadian Dollar Forecast
Looking ahead, will the Ukraine crisis continue to dampen the Pound Canadian Dollar exchange rate as the West looks to step up more pressure on Russia?