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