The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated throughout last week’s session, briefly touching a five-year low, amid the UK cost-of-living crisis and fresh Brexit woes.
What’s Been Happening: Pound Canadian Dollar Wavers Lower on UK Cost-of-Living Anxiety
The Pound (GBP) strengthened against the Canadian Dollar (CAD) at the start of the week. Sterling enjoyed a more upbeat mood after fears of an escalation in the Ukraine crisis did not materialise.
Meanwhile, the commodity-linked Canadian Dollar slipped on Monday as oil prices declined.
On Tuesday, the pairing wavered. The British Retail Consortium (BRC) reported that UK retail sales fell by 1.7% year on year in April. In turn, this highlighted the UK cost-of-living crisis as consumer spending decreased.
In midweek trade, renewed Brexit uncertainty weighed on demand for Sterling. UK-EU negotiations regarding the Northern Ireland protocol were set to restart. However, GBP investors were spooked amid reports that the UK was willing to scrap the agreement.
At the end of the week, it was revealed the UK GDP suffered a 0.1% contraction in March, which weighed on the Pound as strengthening oil prices boosted CAD.
Three Things to Watch Out for This Week
- Inflation Readings
Both the UK and Canada are set to reveal their latest consumer price index readings this week. Whilst Canada’s inflation rate is forecast to hold steady at 6.7%, UK inflation is expected to increase to 9.1%. If this prints true, it may exacerbate the UK cost-of-living crisis and hinder GBP exchange rates.
- UK Retail Sales
Sales are predicted to have contracted by 0.2% in April. This would be the third successive month of declining sales and may weigh heavily on Sterling.
- Oil Markets
The commodity-linked ‘Loonie’ is likely to remain susceptible to oil dynamics. If the Russia-Ukraine war continues to drive oil prices higher, it may bolster demand for CAD.
Pound Canadian Dollar Forecast
Looking ahead, the Pound Canadian Dollar exchange rate may be under pressure this week if the UK’s inflation reading and retail sales fuel fears about the UK cost-of-living crisis.