Pound Canadian Dollar Exchange Rate Firms after Hitting Nine-Year Low

The Pound Canadian Dollar (GBP/CAD) exchange rate recovered strongly despite poor UK data threatening to sink the Pound as oil slumped to a monthly low.

What’s Been Happening: Pound’s Resurgence at Hand of Hawkish BoE

Poorer than expected UK GDP data saw the Pound start the week on the back foot, with the economy unexpectedly contracting in April. Making matters worse was the release of latest jobs data with unemployment unexpectedly rising over the same period.

Midweek saw political headwinds continue to weigh on GBP/CAD, which plummeted to its worst level in nine years as Brexit jitters returned.

Meanwhile, the Canadian Dollar started the week strongly as crude oil prices enjoyed weekly highs, as it stayed above $120 a barrel, bolstering demand for the ‘Loonie’.

By Wednesday, however, the demand for oil slumped and the commodity-linked Canadian Dollar also saw a drop.

Towards the end of the week, the Pound initially nosedived before making a strong recovery to end the week as the Bank of England announced a 25bps interest rate hike. The bank’s forward guidance bolstered hopes for a 50bps hike in the future.

The ‘Loonie’ then stumbled at the end of the week as oil slipped to $109, a monthly low.

Three Things to Watch Out for This Week

  1. Inflation Rates

After hitting a 40-year high, UK inflation is set to tick over at just 9.1%, fueling fears of an impending recession. If inflation does continue to soar, the BoE could be forced to act more aggressively in their monetary policy, potentially boosting the Pound.

  1. Retail Sales

Both UK and Canada retail sales will print this week, an expected contraction in the UK against an expected expansion in Canada could weaken GBP/CAD.

  1. UK Manufacturing & Services PMI

Despite an expected expansion in both the manufacturing and services sectors, activity is expected to continue to slow highlighting UK’s economic headwinds.

Pound Canadian Dollar Forecast

Looking ahead, the remainder of this week could see the GBP/CAD exchange rate fluctuate wildly in response to some high-impact UK data releases.

Danny Tingle

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