Pound Canadian Dollar Exchange Rate Volatile amid UK Political Chaos

The Pound Canadian Dollar (GBP/CAD) exchange rate oscillated wildly last week, as a continuous string of political headlines rocked the pairing.

What’s Been Happening: Sterling Fluctuates amid UK Political Turmoil

The Pound Canadian Dollar (GBP/CAD) exchange rate began the week on a positive note amid Chancellor Jeremy Hunt’s plan to scrap large swathes of unfunded tax cuts.

The buoyancy did not last, with Sterling’s gains being reversed through the middle of the week as Liz Truss’s government fell into disarray. Truss’s premiership began appearing increasingly tenuous amid a string of political setbacks.

Her resignation brought Sterling a brief respite but was undermined by soaring government borrowing costs and below-forecast retail sales. With public sector debt hitting its highest levels since the 1960s, and inflation continuing to pile on top of the cost-of-living crisis, GBP continued to slide.

Meanwhile, the Canadian Dollar (CAD) endured a week of mixed trade. Oil prices began to fluctuate due to the Organization of the Petroleum Exporting Countries (OPEC) limiting production. This weighed on the oil-linked ‘Loonie’s ability to make gains during risk-on trade.

With last week seeing investors strike a generally risk-averse tone, CAD struggled to make any strong headwinds to counteract oil’s volatility.

Three Things to Watch for This Week

  1. Rishi Sunak’s First Days

With Sunak expected to continue Hunt’s plan for fiscal orthodoxy, the Pound may strengthen as he aims to reassure investors.

  1. Bank of Canada Interest Rate Decision

Wednesday will see the Bank of Canada (BoC) deliver its latest interest rate decision. With markets pricing in a 75bps hike, CAD may make gains.

  1. Canada GDP

September’s GDP figure is expected to show another stall in the Canadian economy. CAD may see headwinds as a result.

Pound Canadian Dollar Outlook

The Pound Canadian Dollar exchange rate may see further volatility this week, as Sunak  navigates the UK’s economic landscape. So far, GBP/CAD has begun the week on a steady note as he works to ensure stability.

John Mulcahey

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