Pound Canadian Dollar (GBP/CAD) Exchange Rate Wavers amid Mounting Recession Fears
The Pound Canadian Dollar (GBP/CAD) exchange rate is trading narrowly as the UK’s cost-of-living crisis rumbles on as oil prices continue to slide.
At time of writing, the GBP/CAD exchange rate is around CA$1.5255, relatively unchanged from this morning’s opening levels.
Pound (GBP) Pressured by Bleak Economic Outlook
The Pound (GBP) continues its struggle for demand as relentless headwinds weigh heavy. Soaring energy prices, out of control inflation, and growing social unrest are all deterring investors.
The living cost crunch continues to worsen as food price inflation hits its highest level since the 2008 global financial crash. Prices soared across the board with milk, crisps, and margarine being the biggest drivers. Shop prices have surged by 5.1% in August YoY, up from 4.4% in July, the biggest increase since 2008. Helen Dickinson, Chief Executive of the British Retail Consortium (BRC) said of soaring inflation:
‘The situation is bleak for both consumers and retailers, but retail businesses will remain committed to supporting their customers through offering discounts to vulnerable groups, expanding value ranges, fixing prices of essentials and raising staff pay.’
Meanwhile, fears are mounting that inflation in the UK could hit 22%, edging ever-closer to a post-war record of 24.5% in 1975. With wholesale energy prices continuing to soar, and expecting to remain at record highs, could see the energy cap rising another 80% in January. Pressure also continues to mount on the incoming Prime Minister to announce fiscal support.
If financial support isn’t provided in time, charities have warned that households could fall into destitution this winter. Sterling could remain under pressure until fiscal support is rolled out.
Canadian Dollar (CAD) Wavers amid Sliding Oil Prices
The Canadian Dollar (CAD) is enjoying mixed success against its peers today after crude oil prices plunged by 5% on Tuesday amid recession fears and fresh supply concerns.
Lending some moderate support to the commodity-linked ‘Loonie’ is the positive PMI data out of China. The manufacturing sector edged slightly higher to 49.4 versus an expected 49.2, within touching distance of an expansion. Non-manufacturing also improved at 52.6, marginally higher than the expected 52.
However, growing concerns of a long-lasting economic slowdown in China are limiting any further gains. The world’s second largest economy, despite positive PMIs and the 1 trillion Yuen cash injection, is still struggling with strict Covid shutdowns. Chinese authorities have imposed tougher restrictions in several major cities as it upholds the zero-Covid policy.
Pound Dollar Exchange Rate Forecast: Expansion of Canada’s Economy to Boost the Loonie?
Looking ahead, GDP growth data for Canada could see the Canadian Dollar bolstered if forecasts print true. An expected 4.4% annualised expansion in the second quarter, and a 1% QoQ growth, could boost investors’ spirits as an improving economy could allay recession fears.
Meanwhile, a lack of major data for the Pound could see it remain exposed to domestic troubles. Unless the UK government announce solid plans for fiscal support, Sterling could continue to encounter multi-year lows against its rivals.