The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated through the week before dropping as the UK economy contracted for the month of June, nudging the UK closer to a recession.
What’s Been Happening: GBP/CAD Exchange Rate Falls as Recession Fears Mount
The Pound started the week with modest strength as an upbeat market mood helped by promises of increased fiscal support to help the cost-of-living crisis.
Despite the gloomy Bank of England (BoE) economic outlook delivered the previous week, hawkish comments from BoE policymakers hinted at further interest rate hikes.
Midweek saw Sterling boosted as US inflation softened, improving global market sentiment as hopes grew of inflationary pressures finally easing.
However, end of the week saw the Pound plummet on a contracting economy in the month of June. Despite coming in better-than-expected, GDP growth fell for the first time in a year, further boosting chances of a recession.
Meanwhile, the Canadian Dollar (CAD) started the week quietly amid a lack of data or clear direction in oil prices, but midweek saw the ‘Loonie’ tumble as US inflation printed softer-than-expected, tempering further interest rate hikes.
However, with an improving global market sentiment, oil prices started to climb, boosting the Canadian Dollar. Further supporting the ‘Loonie’ was the news that with winter approaching, natural gas buyers are turning to oil as energy prices continue to soar.
Three Things to Watch Out for This Week
- Inflation Rates
Both Canada and the UK inflation rates print, with contrasting forecasts. The former is expected to soften whereas UK’s inflation is to hit a fresh 40-year high.
- Retail Sales
Likewise, retail sales are expected to print differently between the two as Canadian retail sales are forecasted to rise as UK sales look to decline for the third consecutive month.
- Oil Prices
A wavering global market mood could see further fluctuations in oil prices, likely to weigh on the ‘Loonie’.
Pound Canadian Dollar Forecast
Elsewhere, the GBP/CAD exchange rate could see further movement as the persistent political uncertainty in the UK is likely to keep pressure on Sterling.