Pound Canadian Dollar Exchange Rate Weekly Forecast: GBP/CAD Fluctuated on BoE’s Dire Economic Forecasts

The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated throughout last week’s session as the Bank of England (BoE) spooked investors with its latest forecasts.

What’s Been Happening: Pound Canadian Dollar Seesaws on BoE’s Alarming Economic Forecasts

The GBP/CAD exchange rate struggled to attract support at the beginning of last week: risk aversion weighed on Sterling whilst oil prices slumped. CAD continued to seesaw alongside oil dynamics throughout the week’s session.

On Tuesday, the Pound was buoyed by the UK’s latest manufacturing PMI. In April, the finalised PMI exceeded market forecasts and printed at 55.8.

Sterling then plunged to multi-month lows on Thursday after the BoE revealed its latest interest rate decision.

As expected, the BoE hiked interest rates to a 13-year high of 1%. In a hawkish surprise, a third of the Momentary Policy Committee voted for a 0.5% interest rate hike.

In spite of this, the Pound collapsed after the BoE unveiled bleak economic forecasts. The bank signalled a UK recession may be on the cards and warned inflation could reach 10% by the end of the year.

On Friday, the Conservative Party performed poorly in local elections, raising fresh questions over Boris Johnson’s premiership which weighed on GBP exchange rates.

Meanwhile, the ‘Loonie’ firmed as Canada’s unemployment rate slipped to 5.2%.

Three Things to Watch Out for This Week

  1. UK GDP

In the first quarter, the UK’s preliminary GDP is forecast to slip from 1.3% to 1%, potentially exerting pressure on GBP exchange rates.

  1. BoC Deputy Governor Speech

Bank of Canada (BoC) Deputy Governor Toni Gravelle is scheduled to speak on Thursday. If Gravelle strikes a hawkish tone, it may bolster demand for the ‘Loonie’.

  1. Market Sentiment

 The GBP/CAD exchange rate is also likely to remain sensitive to market sentiment this week. Will a cautious mood weigh on the pairing?

Pound Canadian Dollar Forecast

Looking ahead, the GBP/CAD exchange rate may be under pressure this week if the UK’s preliminary GDP figures report UK economic growth slowed in the first quarter.

Bethany Uren

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