The Pound Canadian Dollar (GBP/CAD) exchange rate fell despite the Bank of England (BoE) raising interest rates by 75bps.
What’s Been Happening: GBP/CAD Slumped on Prolonged Recession Fears
The Pound started the week on the back foot as credit card borrowing for September slipped, highlighting a slowdown in the economy.
However, surprising PMI data for the manufacturing sector provided some modest support for Sterling. Despite remaining in contracting territory, the better-than-expected figure capped any further losses.
Midweek and the Pound continued its slide as food inflation soared, exacerbating the cost-of-living crisis. Food costs surged in October 11.6%, the highest level on record.
The BoE opted to raise interest rates by 75bps, the fastest pace since 1989. However, dovish comments that followed weighed on Sterling. The expected hike to 3% did little to inspire investors as inflation is set to remain above 10%, with the UK already in a recession.
End of the week and the slide continued as the BoE warned that not only is the UK in a recession, but it could be the longest in 100 years.
Meanwhile, the Canadian Dollar started the week sluggish as a lack of data left the ‘Loonie’ exposed to market sentiment but climbing oil prices kept it buoyant.
An expected fall in manufacturing activity was met with worse-than-expected PMI data. But a resurgence of WTI crude oil prices capped any further losses.
End of the week and oil prices climbed further and bolstered the commodity-linked ‘Loonie’. WTI crude soared to a one-month high of $93 a barrel and was helped by employment figures printing better-than-expected.
Three Things to Watch Out for This Week
- China Inflation
If forecasts of softening inflation prove true, market sentiment could improve.
- BoE Speeches
A flurry of speeches this week could inspire movement if policymakers comment on monetary policy going forward.
- UK GDP Growth
An expected contraction in the economy could weigh on Sterling.
Pound Canadian Dollar Forecast
Elsewhere, any further developments out of China or Ukraine will likely have an effect on the global market sentiment.