Pound Canadian Dollar Exchange Rate Weekly Forecast: GBP/CAD Plummeted to 12-Year Low Despite UK’s Energy Bill Support

The Pound Canadian Dollar (GBP/CAD) exchange rate wavered throughout the week before plunging to the lowest level since 2010 amid the bleak UK economic outlook.

What’s Been Happening: GBP/CAD Exchange Rate Fluctuated Despite Cost-of-Living Crisis Support

The Pound (GBP) started the week on the front foot at investors cheered the end of political uncertainty. Frontrunner Liz Truss was announced as Prime Minister.

Midweek, however, saw the Pound dip as Bank of England (BoE) policymakers struck a cautious tone in their speech to parliament. Warnings of an impending recession raised fears of a slower pace of tightening, paring bets for future rate hikes.

The announcement of Truss’ £100bn support package initially saw Sterling spike. The government froze the energy bill cap at £2500, with equivalent support aimed at businesses. But with concerns over how the support will be funded, the Pound soon slipped again.

Meanwhile, the Canadian Dollar (CAD) also started the week strongly as demand for oil spiked in the wake of Gazprom extending their shutdown of the key Nord Stream 1 pipeline.

Midweek and the Bank of Canada (BoC) raised interest rates for the fifth consecutive month, bringing the rate up to 3.25%.

However, the turbulent oil market saw WTI crude slide to $81 a barrel, the lowest level since January 2021.

End of the week and higher-than-expected unemployment figures weighed on the ‘Loonie’. An expected 5% was met with 5.4%, the first increase in unemployment in seven months.

Three Things to Watch Out for This Week

  1. UK Inflation rate

CPI is expected to increase to 10.2%, a fresh 40-year high, could see the Pound bolster on rate hike bets.

  1. UK Cost-of-Living Crisis

Mounting fears of how the fiscal support package will be funded could see Sterling slip on renewed inflationary pressures.

  1. Oil Prices

With the potential energy crisis in Europe, oil could see further climbs if demand picks up.

Pound Canadian Dollar Forecast

Elsewhere, any further disruptions for China and their stuttering economy could see the demand for oil wane, and the ‘Loonie’ drop.

Danny Tingle

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