The Pound Canadian Dollar (GBP/CAD) exchange rate rallied sharply over the past week. The pairing climbing to a two-month high after the UK government scrapped its controversial mini-budget.
What’s Been Happening: UK Political Headlines Grip the Pound
The Pound Canadian Dollar exchange rate started the week with a drop, as further falls in the UK gilt market prompted further action from the Bank of England (BoE).
However, the BoE’s actions bore fruit. As the week continued, the gilt market continued to recover. This lent a decent tailwind to Sterling, allowing the pairing to find a plateau on Wednesday. Thursday saw the pound spike, with rumours swirling of further tax-cut U-turns from former Chancellor Kwasi Kwarteng.
Friday saw the Pound fluctuate as Kwarteng was sacked and replaced by Jeremy Hunt, coupled with Liz Truss’ press conference proving to be less than promising to investors. While GBP/CAD retreated from its best levels it was still able to close the week up around three cents.
Meanwhile, the Canadian Dollar was largely beholden to oil price dynamics, with a fall in oil prices over the course of the week denting the ‘Loonie’.
Similarly, CAD was affected by a risk-averse market mood, muting the gains the currency could have seen.
Three Things to Watch for This Week
- UK Political Uncertainty
Liz Truss’s grip on power looks increasingly tenuous, with rumours swirling that she could be forced out of office within days. The resulting uncertainty could act as a headwind for the Pound.
- UK Inflation
UK inflation is forecast to have climbed back into double digits in September. Will this stoke cost-of-living concerns and weigh on GBP exchange rates?
- Canada Inflation
Canada’s own CPI release is expected to report domestic inflation slowed last month. Potentially denting the ‘Loonie’ if it reduces pressure on the Bank of Canada (BoC) to continue aggressively raising rates.
Pound Canadian Dollar Outlook
The Pound Canadian Dollar exchange rate could be met by additional volatility this week amid growing questions over the future of Liz Truss’s premiership.