The Pound to Canadian Dollar (GBP/CAD) exchange rate strengthens in spite of concerns over the UK’s cost of living crisis.
What’s Been Happening: Pound’s Accent Rocked by Inflation Surge
A positive jobs report helped buoy the Pound early in the week as the unemployment rate edged down to 3.7%, the lowest since 1974. For the first time since records began, the number of job vacancies outnumber unemployed people.
Midweek, however, saw the Pound fall sharply as UK inflation hit 9%, the highest in over four decades, sparking fresh concern over the UK’s cost of living crisis.
Meanwhile, the Canadian Dollar started the week on the front foot as crude oil prices soared to $111.30 a barrel, bolstering demand for the ‘Loonie’.
Capping any further gains in midweek was the release of Canada’s own consumer price index, as inflation rose to 6.8% for the month of April, the highest since 1991 and above market forecasts. A surge in food and shelter prices contributed to the rise as the Russia Ukraine conflict continued to pressure energy and commodity prices.
Towards the end of the week, positive UK retail sales helped lend support to sterling as sales unexpectedly rose 1.4% month on month in April, beating out expectations of a 0.2% fall.
Three Things to Watch Out for This Week
- PMI Data
Weaker-than-expected manufacturing and services data today leaves the Pound on the defensive at the start of this week, with an alarming slump in Service sector growth reviving recession fears.
- Oil Markets
The commodity-linked ‘Loonie’ will remain susceptible to oil dynamics, and as the Ukraine invasion continues to drive up oil prices, CAD could see a boost.
- UK Politics
The impending publication of the Sue Grey report into No 10 lockdown breaches could stoke fresh concerns over Boris Johnson’s premiership and apply additional pressure to Sterling.
Looking ahead, the remainder of this week could see the GBP/CAD exchange rate fluctuate further as the UK’s darkening economic landscape could continue to weigh heavily on the Pound Canadian Dollar exchange rate.