The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated throughout last week’s session as the UK’s consumer price index renewed concerns over cost-of-living crisis.
What’s Been Happening: Pound Canadian Dollar Wavered Following High UK Inflation Reading
The GBP/CAD exchange rate started on the back foot but quickly regained ground, most likely due to a technical correction, after slumping sharply following the Bank of England’s (BoE) dovish forward guidance a week earlier.
Meanwhile, Canadian producer price inflation for February rose from 2.5% to 3.1%, offering the ‘Loonie’ some support.
Midweek, GBP investors awaited the UK’s CPI reading, optimistic that a reading in line with market forecasts would force BoE to re-examine its future aggressive steps.
However, UK inflation surged past expectations, climbing from 5.5% to 6.2% in February, a new 30-year high. Alongside a highly criticised Spring Statement from Chancellor Rishi Sunak, this gave rise to fresh concerns over the UK’s cost-of-living crisis.
This was highlighted by the UK’s latest retail sales figures, as a sharp drop in sales growth last month stoked fears that consumer spending is already suffering.
For the most part, the commodity-linked Canadian Dollar seesawed throughout the week’s session, correlating its strength with oil prices.
Three Things to Watch Out for This Week
1. The Ukraine Crisis
Russia’s invasion of Ukraine is likely to remain the key catalyst for movement in the Pound Canadian Dollar exchange rate. Should peace talks continue to make slow progress, the risk-sensitive Pound may struggle against its peers.
2. BoE’s Broadbent Speech
A speech from BoE’s Deputy Governor, Ben Broadbent, is scheduled for Wednesday. If Broadbent delivers a broadly dovish tone, it’s likely to cause pressure on Sterling.
3. Canadian GDP
The Canadian GDP for January is forecast to increase from 0% to 0.2%. If this prints true, it may boost CAD.
Pound Canadian Dollar Forecast
Looking ahead, should peace talks between Russian and Ukrainian officials remain at an impasse, it may weigh on the GBP/CAD exchange rate.