The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated wildly throughout the week as downbeat assessments for the UK economy continued to weigh heavily.
What’s Been Happening: GBP/CAD Exchange Rate Traded Erratically as UK Outlook Darkens
The Pound (GBP) started the week on the back foot as government borrowing soared to record highs, muting optimism for growth plans ahead of the spring budget.
Tuesday saw both manufacturing and services PMIs remaining in contraction territory, with the former exceeding expectations. Services, however, printed worse than expected.
Midweek and the Pound mustered some moderate strength on increased rate hike bets. Expectations of another 50bps interest rate hike buoyed Sterling.
End of the week and the Pound slid once again on Chancellor Jeremy Hunt’s economic growth speech. Failing to inspire much confidence in the UK economy’s plans for growth, Sterling ticked lower.
Meanwhile, the Canadian Dollar strengthened modestly as WTI crude oil prices ticked higher. Optimism surrounding China’s reopening bolstered demand.
Midweek and the Bank of Canada (BoC) opted for a 25bps rate hike, in line with expectations. However, a dovish accompanying statement sent the ‘Loonie’ plunging as the central bank expects to hold the policy rate.
End of the week and CAD recovered as oil climbed to $82 a barrel, bolstering the commodity-linked ‘Loonie’.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
If the central bank opts for another 50bps rate hike, Sterling could climb. However, the dire economic situation could inspire a more dovish speech from the BoE.
- Canada GDP Growth
An expected 0.1% growth could provide modest support for the Canadian Dollar, a marked improvement over the stagnating economy in November.
- UK Final PMIs
Confirmation of a sixth straight month of declining factory activity could drag Sterling lower. Meanwhile, a confirmed fall to 48 in the services sector points to the lowest figure in two years.
Pound Canadian Dollar Forecast
Elsewhere, oil prices will remain a key driver in CAD movement. An improving risk sentiment could see WTI crude climb, taking the ‘Loonie’ with it.