The Pound Canadian Dollar (GBP/CAD) exchange rate wavered throughout last week’s session after Bank of England (BoE) governor, Andrew Bailey, delivered a dovish speech.
What’s Been Happening: Pound Canadian Dollar Fluctuated Following Dovish BoE Speech
The Pound Canadian Dollar exchange rate fluctuated on Monday after BoE Governor Bailey reiterated his dovish approach to future monetary policy which diminished rate hike bets.
This continued to weigh on Sterling into Tuesday, though progress in Russian-Ukrainian negotiations bolstered GBP.
Meanwhile, the commodity-linked ‘Loonie’ struggled to gain momentum as oil prices slipped as a new Covid lockdown in China stoked fears of a decline in global demand.
Later in the week, Canada’s GDP reading met market forecasts, buoying CAD. However, the ‘Loonie’ quickly lost ground once again as oil prices dropped.
At the same time, UK GDP growth rate revealed the UK economy expanded by 1.3% in the final three months of 2021, up from both 1% expectations and the downwardly revised third quarter’s 0.9%.
Moreover, Western leaders became sceptical of the Kremlin’s promises made during Russian-Ukrainian peace talks, worried the Russian military were reorganising instead of withdrawing. In turn, this weighed on GBP exchange rates.
Three Things to Watch Out for This Week
1. Russia-Ukraine War
Negotiations between Russia and Ukraine are likely to act as the main catalyst of movement in the Pound Canadian Dollar exchange rate. If peace talks remain at a stalemate, it may place pressure on the risk-sensitive Sterling.
2. Canadian Trade Balance
Canada’s trade balance for February is forecast to increase from CA$2.62 billion to CA$2.9 billion. Should this print true, it will reveal an increase in trade surplus and support CAD.
3. BoE Pill Speech
A speech from BoE policymaker, Huw Pill, may influence demand for the Pound: if he strikes a dovish tone, it may weigh on Sterling.
Pound Canadian Dollar Forecast
Looking ahead, if Russia-Ukraine negotiations struggle to make headway, fading hopes of the war coming to a close imminently may place pressure on the GBP/CAD exchange rate.