The Pound Canadian Dollar (GBP/CAD) exchange rate strengthened last week, amid hopes for a shallower UK recession.
What’s Been Happening: UK PMI Surprise Buoys Sterling
The Pound Canadian Dollar (GBP/CAD) exchange rate began the week trapped in a narrow range, with minimal data preventing clear movement.
The UK’s latest PMI indexes printed on Wednesday, and following an above-forecast showing, sent Sterling climbing. The data showed the first clear improvement in both manufacturing and services since June, prompting hopes of a milder recession.
The Pound then capitalised further on a weakening ‘Loonie’ care of hawkish Bank of England (BoE) policymakers. While inflation remained troublesome, the BoE indicated there was more to be done, prompting bets of a 50bps rate hike.
Meanwhile, a fall in Canadian retail sales served to mute the ‘Loonie’. The downturn in CAD exchange rates was reinforced by a sharp drop in oil prices.
Oil prices fell to multi-month lows and erased their gains over the year due to falling demand. As such, CAD remained vulnerable against GBP.
Three Things to Watch Out for This Week
- Canadian GDP Data
Canadian Q3 GDP data is forecast to show a fall quarter on quarter from 0.8% to 0.4%. If this prints as forecast, CAD could weaken.
- Canadian Unemployment Rate
The latest unemployment rate for Canada prints on Friday. An uptick from 5.2% to 5.3% is forecast, which may pull CAD lower.
- UK BoE Policymaker Speeches
BoE policymakers are scheduled to speak throughout the week. If they continue the Bank’s hawkish attitude, Sterling may strengthen.
Pound Canadian Dollar (GBP/CAD) Outlook
The Pound Canadian Dollar exchange rate may strengthen this week, with Canada due to see more macroeconomic data. With most data releases expected to show a weakening Canadian economy, Sterling may strengthen against CAD. However, if the BoE policymakers strike a dovish note, or if the UK’s domestic situation continues to darken, GBP may slip.