Pound Canadian Dollar Exchange Rate Rangebound as UK Retail Crisis Unfolds

Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted as UK Retail Suffers

The Pound Canadian Dollar (GBP/CAD) exchange rate is narrowing this morning, as UK retailers continue to suffer through the country’s economic downturn.

At the time of writing, GBP/CAD is trading at around CA$1.5653, a drop of roughly 0.2% from the morning’s opening rates.

Pound (GBP) Ticks Down as Retail Sector Suffers

The Pound (GBP) is trending downwards this morning, with a lack of economic data leading investors to focus on domestic headlines.

This morning, the retail chain Joules announced it intended to appoint administrators. The move bolstered other statements from businesses last week which demonstrated weakening profits and a gloomy outlook.

Joules’ announcement followed on from Marks and Spencer’s warning of a ‘gathering storm’ for the UK retail sector. Pub chain Wetherspoons also announced a wave of fresh closures, and Made.com entered administration.

Various retailers are highlighting just how significantly the UK’s economic downturn is affecting them, with profits falling for many businesses.

Victoria Scholar, the Head of Investment at Interactive Investor, highlighted the news’ impact. She stated:

‘Joules appears to be the latest victim of the UK’s retail crisis with the demise of the high street and the cost-of-living crisis. Just last week Made.com entered into administration after the interior design and DIY pandemic boom faded along with its furniture sales.’

With the cost-of-living crisis unlikely to abate, more businesses may come under pressure. With the UK entering a prolonged recession, the weakening retail sector may continue struggle.

Canadian Dollar (CAD) Uplifted by US Dollar Strength

The Canadian Dollar (CAD) is strengthening this morning, as strength in the US Dollar is serving to buoy the ‘Loonie’.

Markets aiming to correct a repricing on the US Dollar following last week’s post-inflation data sell off. An increasingly positive correlation between the two is serving to elevate CAD.

Further elevating CAD are investor hopes for further rate hikes from the Bank of Canada (BoC). Comments from BoC Governor Tiff Macklem indicated the bank was open to further rate hikes, due to a tight labour market.

Governor Macklem stated:

‘The tightness in the labour market is a symptom of the general imbalance between demand and supply that is fuelling inflation and hurting all Canadians.’

However, the oil-linked ‘Loonie’ is likely seeing gains tempered this morning by falling oil prices. With demand falling and supplies reduced, prices have begun to drop today.

Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Inflation Rates in Focus

Looking ahead for GBP/CAD, Wednesday will bring the latest inflation data for both Canada and the UK. UK inflation is expected to rise again, potentially boosting GBP as investors expect higher BoE rate hikes. Canadian inflation, meanwhile, is expected to stay the same.

Tuesday brings September’s UK unemployment rate, which is forecast to remain at the lowest level since 1974. Should no change occur, GBP may bolster as it reinforces investor rate hike bets due to a resilient labour market.

Elsewhere, any news ahead of Thursday’s UK Autumn Statement may further boost the Pound if they inspire confidence from investors.

The oil-linked ‘Loonie’ may also be affected by fluctuating oil prices. CAD may rally alongside the US Dollar (USD) to an increasingly positive correlation.

John Mulcahey

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