The Pound Canadian Dollar (GBP/CAD) exchange rate traded narrowly through last week’s session as weaker-than-expected UK inflation offset weak oil prices and a strong rebound in UK retail sales.
What’s Been Happening: GBP/CAD Exchange Rate Fluctuated on Pared BoE Rate Hike Bets
The Pound (GBP) started the week on the front foot as UK jobs data pointed to a tight labour market. Unemployment remained at 3.7% whilst wage growth excluding bonuses soared by 6.7%.
However, pressure soon returned as inflation eased to 10.1%, missing forecasts for a modest softening to 10.3%. Despite remaining far above the Bank of England’s (BoE) target rate, demand waned on slashed rate hike expectations.
At the end of the week stronger-than-expected retail sales buoyed Sterling. Against forecasts of -0.3%, sales leapt by 0.5%.
Meanwhile, the Canadian Dollar struggled for demand throughout the week amid a lack of economic data and fluctuating oil prices.
A hawkish speech from Bank of Canada (BoC) Deputy Governor Paul Beaudry lent some modest support to the ‘Loonie’ as he stressed the importance of reining in inflation.
However, WTI crude continued to waver before plummeting to a 10-day low towards the end of the week. With fears of a recession growing once more, and a potential downturn in demand, the commodity-linked Canadian Dollar soured.
Three Things to Watch Out for This Week
- Canada Inflation Rate
A third successive softening could see inflation ease to 6.1%. After signalling the end to its aggressive tightening cycle in the last meeting, the BoC could be close to pausing its rate hikes altogether.
- Post-Brexit Trade Deal
With the Northern Ireland protocol still hanging in the balance, an amicable resolution this week could see the Pound climb.
- Canadian Retail Sales
An expected rebound in retail sales could bolster the ‘Loonie’. Following a -0.1% decline, retail sales are predicted to increase 0.5%.
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.