The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated throughout last week’s session before slumping to a two-year low as Russia’s invasion of Ukraine increased market volatility.
What’s Been Happening: Pound Canadian Dollar Wavers in Response to Ukraine Crisis
The GBP/CAD exchange rate started the week on the back foot as an absence of UK economic data left the Pound (GBP) susceptible to market sentiment.
At the same time, crude prices reached a 14-year high, strengthening the commodity-linked Canadian Dollar (CAD).
On Tuesday, crude prices remained elevated. However, the correlation between oil and CAD appeared to weaken, causing the ‘Loonie’ to soften, though a better-than-forecast trade surplus limited CAD’s losses.
Meanwhile, a temporary ceasefire allowed Ukrainian cities to evacuate. GBP’s gains were capped however as investors remained wary as Russia continued shelling in some regions.
By midweek, GBP/CAD became rangebound as Sterling remained steady, while weakening oil prices and a risk-on sentiment kept CAD in a tight range.
Nearing the end of the week, the close of disappointing peace talks damaged risk appetite, weighing on the Pound.
Friday saw the publication of strong Canadian employment data. This buoyed CAD and bolstered rate hike bets, with the next Bank of Canada (BoC) meeting scheduled for mid-April.
Upbeat UK GDP figures for January capped GBP’s losses. However, this wasn’t enough to prevent the Pound Canadian Dollar exchange rate from hitting a two-year low.
Three Things to Watch Out for This Week
1. Ukraine Crisis
The Russia-Ukraine war is likely to remain the key driving force for the near-term. Should future peace talks deliver a more upbeat outcome, it may bolster Sterling.
2. Canadian Inflation Reading
Canada’s CPI for February is expected to increase from 5.1% to 5.5%. If inflation meets market forecasts, it may support rate hike bets ahead of the BoC’s next meeting.
3. BoE Interest Rate Decision
The Bank of England (BoE) is scheduled to increase interest rates from 0.5% to 0.75% on Thursday, which could boost Sterling.
Pound Canadian Dollar Forecast
Looking ahead, will future peace talks between Russia and Ukraine deliver a diplomatic solution to the Ukraine crisis and support the Pound Canadian Dollar exchange rate?