The Pound Canadian Dollar (GBP/CAD) exchange rate climbed throughout the week amid optimism of a Fed slowdown and progress with the NI protocol.
What’s Been Happening: GBP/CAD Recovered Despite Darkening Economic Outlook
The Pound started the week on the back foot as poor retail sales further highlighted the cost-of-living crisis. The Confederation of British Industry’s (CBI) distributive trades survey showed a drastic fall in retail sales.
Further downbeat economic data weighed on Sterling until hints of a slowdown from the Federal Reserve lent support. A slowing in the pace of monetary policy could see pressure finally ease for the UK economy.
End of the week and a breakthrough in the Northern Ireland protocol negotiations gave investors more reason to cheer. Positive talks from both the EU and Northern Ireland gave credence to a potentially amicable solution. With investors fearing a trade war between the UK and EU, an agreeable resolution would allay those concerns.
Meanwhile, the Canadian Dollar saw a turbulent week, in line with the volatile oil markets. Protests in China dented demand for oil, and in turn the commodity-linked ‘Loonie’ suffered.
Despite Canadian GDP beating forecasts, it showed the economy had slowed considerably in September and flatlined in October.
Towards the end of the week and the Canadian Dollar failed to muster support despite better-than-expected manufacturing PMI. However, moods remained downbeat as it showed a fourth consecutive month of falling activity.
Three Things to Watch Out for This Week
- Bank of Canada Interest Rate
A seventh consecutive hike is expected, another 50bps rate hike would bring the cash rate to 4.25%.
- UK Domestic Woes
With little data to go on this week, GBP investors will be keeping an eye on the myriad of domestic headwinds threatening to sink Sterling. Continued disruptions through industrial action could weigh on the Pound.
- China
Further relaxing of Covid restrictions could improve the risk sentiment.
Pound Canadian Dollar Forecast
Elsewhere, market sentiment will continue to be the main driver for the Canadian Dollar. Any further developments out of China or Ukraine could impact the market mood.