Pound Canadian Dollar Weekly Forecast: GBP/CAD Exchange Rate to Slip on Downbeat BoE?

The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated last week, trading sideways overall. Sterling mainly benefitted from a sell-off in the Euro (EUR) while the Canadian Dollar (CAD) recovered its losses thanks to positive jobs data.

What’s Been Happening: GBP/CAD Moves Sideways in Choppy Trade

The Canadian Dollar wavered through the first part of the week amid thin trading conditions and some mixed movement in the oil market.

The ‘Loonie’ then stumbled following the Bank of Canada’s (BoC) Financial System Review. The BoC warned of elevated risks due to tighter monetary policy, high inflation and global geopolitical tensions.

However, CAD was able to regain its losses on Friday. Canada’s unemployment rate unexpectedly fell from 5.2% to 5.1%, thereby boosting the ‘Loonie’.

Meanwhile, the Pound (GBP) wobbled early on last week as Boris Johnson faced a no confidence vote.

Sterling then jumped after the European Central Bank (ECB) sparked a slump in EUR, giving the Pound some cross-driven strength. An uptick in UK consumer confidence may have also helped.

But Brexit worries weighed on GBP by week’s end. The government said it would publish plans to abolish parts of the Northern Ireland protocol on Monday. Critics fear it could trigger a UK-EU trade war.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision

Economists expect the Bank of England (BoE) to raise interest rates by 25 bps on Thursday. With the country’s cost-of-living crisis worsening, warnings from the BoE could hurt the Pound.

  1. Brexit

Tensions over the Northern Ireland protocol may continue to simmer this week, which could also put pressure on Sterling.

  1. Oil Prices

Amid a lack of notable Canadian data, crude prices could drive most movement in the oil-linked ‘Loonie’.

GBP/CAD Forecast

This week could bring some volatility, with the BoE decision in focus. Rate hikes often support the bank’s respective currency, but GBP investors may be more concerned about the UK’s economic outlook. A gloomy forecast from the BoE could see GBP/CAD lose ground overall this week.

Samuel Birnie

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