Pound Canadian Dollar Weekly Forecast: GBP/CAD Exchange Rate Fluctuates as UK Cost-of-Living Crisis Returns to Spotlight

The Pound Canadian Dollar (GBP/CAD) exchange rate wavered through last week’s session in response to the UK cost-of-living crisis.

What’s Been Happening: Pound Canadian Dollar Seesaws amid UK Cost-of-Living Concerns

At the beginning of the week, the Pound (GBP) traded flat against the Canadian Dollar (CAD), receiving limited support after a hawkish speech from Bank of England (BoE) Governor Andrew Bailey.

Meanwhile, the commodity-linked Canadian Dollar wavered as oil prices weakened.

On Tuesday, the UK services and manufacturing PMIs for May printed at 51.8 and 54.6 respectively, missing market forecasts. This reignited UK recession fears and weighed on Sterling.

At the same time, the ‘Loonie’ slipped in correlation with dropping government bonds.

In midweek trade, GBP exchange rates were dominated by Sue Gray’s ‘partygate’ report. Although it initially caused GBP investors to trade cautiously, the report didn’t undermine Boris Johnson’s premiership as much as feared.

At the end of the week, demand for Sterling fluctuated after the UK Chancellor Rishi Sunak unveiled his cost-of-living support package. The package was designed to support struggling families amid the cost-of-living crisis.

However, the Confederation of British industry (CBI) warned that the ‘energy profits levy’ may harm investment, capping GBP’s gains.

Meanwhile, CAD exchange rates strengthened in accordance with oil prices. However, the Canadian Dollar’s gains were limited as it was revealed Canadian retail sales unexpectedly stalled in March.

Three Things to Watch Out for This Week

  1. BoC Interest Rate Decision

The Bank of Canada (BoC) is expected to raise its interest rates from 1% to 1.5%. Will the bank deliver some hawkish forward guidance alongside and boost CAD exchange rates?

  1. Canada’s GDP Growth Rate

During the first quarter of 2022, Canadian GDP is forecast to slow from 1.6% to 1.4% potentially denting the ‘Loonie’.

  1. UK Politics

UK politics is likely to continue governing GBP exchange rates, with Brexit uncertainty and the cost-of-living crisis key catalysts.

Pound Canadian Dollar Forecast

Looking ahead, the GBP/CAD exchange rate may be influenced by the BoC’s interest rate decision: will some hawkish forward guidance boost the ‘Loonie’?

Bethany Uren

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