The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated wildly throughout the week as it recovered from record lows amid a timely Bank of England (BoE) intervention.
What’s Been Happening: GBP/CAD Exchange Rate Recovers Steadily
The Pound (GBP) opened the week on the back foot as the market meltdown continued over Chancellor Kwasi Kwarteng’s mini-budget. The BoE failed to inspire any confidence as they ruled out an emergency rate hike until November’s policy meeting.
Midweek and Sterling continued to struggle for support amid a scathing statement from the International Monetary Fund (IMF). Urging the government to rethink their unfunded tax cuts, the IMF joined the chorus of criticism over the UK’s bleak economic outlook.
However, with pension funds on the precipice of collapse, the BoE had no choice but to intervene. The announcement of purchasing government bonds helped steady the markets.
End of the week and the Pound continued its modest recovery in the wake of better-than-expected GDP growth. An unexpected 0.2% expansion versus a 0.1% contraction showed the UK is technically not in a recession.
Meanwhile, the Canadian Dollar (CAD) also started slowly as investors remained wary of a global recession. Falling oil prices weighed heavily on the commodity-linked ‘Loonie’ as WTI crude fell to $76 a barrel, the lowest since January.
Further sapping demand was the likely stalling of the Canadian economy in August. A substantial drop in manufacturing offset increases in retail, wholesale trade and agriculture.
End of the week and the ‘Loonie’ dipped once more as oil once again dropped below $80 a barrel amid global recession fears.
Three Things to Watch Out for This Week
- UK Services PMI
A confirmed drop in the services sector, the first since February 2021, could see the Pound slide.
- UK Politics
Any further reversals of the controversial tax cuts could see GBP investor confidence return.
- Canadian Unemployment Rate
An expected unchanged 5.4% could boost the ‘Loonie’.
Pound Canadian Dollar Forecast
Elsewhere, the developing situations in Ukraine are likely to further impact global market sentiment. Escalating tensions could see oil rise as supplies tighten.