Pound Canadian Dollar Exchange Rate Rocked by UK Political Drama and Plummeting Oil Prices

The Pound Canadian Dollar (GBP/CAD) exchange rate wavered throughout last week as Boris Johnson announced his resignation and oil prices continued to tumble.

What’s Been Happening: GBP/CAD Exchange Rate Wavered amid Political Volatility

Start of the week saw the Pound on the front foot as the final services PMI printed better-than-expected. The sector jumped up to 54.3 from 53.4.

However, headwinds soon resumed as the Bank of England (BoE) published its Financial Stability Report. The bank warned of a gloomy outlook as the cost-of-living crisis is set to worsen, with continually soaring food and energy prices.

Compounding matters was the brewing political storm at Downing Street. A flurry of resignations amid the numerous recent scandals left Johnson no choice but to announce his resignation. Sterling enjoyed a brief spike of demand, but political uncertainty quickly returned as Conservative MPs began vying to replace him.

Meanwhile, the Canadian Dollar came under immediate pressure as manufacturing PMI missed forecasts. A worsening global economy edging towards a recession is to blame for the slowdown in growth.

Oil prices continued to slump throughout the week as the ongoing Ukraine crisis and global recession fears sapped demand. But a better-than-expected unemployment rate provided a modest boost for the ‘Loonie’ at the end of the week.

Three Things to Watch Out for This Week

  1. UK GDP

An expected stall in the UK economy in May is likely to concern investors and could see the Pound sink this week.

  1. BoC Interest Rate Decision

CAD exchange rates could be buoyed if the Bank of Canada (BoC) hikes rates by 75bps up to 2.25%. The bank remains hawkish in its forward guidance.

  1. UK Politics

The Labour party are set to call a no-confidence vote in Johnson, a last-ditch attempt to remove him from office, which could trigger a general election.

Pound Canadian Dollar Forecast

Elsewhere, the Pound Canadian Dollar exchange rate could waver further with the rise of Covid cases in China again. A slowdown in their economy will likely sap demand for oil, and in turn, the commodity-linked Canadian Dollar if lockdowns return.

Danny Tingle

Contact Danny Tingle

Do Not Sell My Personal Information