The Pound Canadian Dollar (GBP/CAD) exchange rate is currently trading at a three-week high. Fresh Brexit optimism has helped to extend the pairing’s gains from last week.
Last Week: Pound Canadian Dollar Spikes on Strong UK PMIs
The Pound (GBP) opened last week on shaky footing. GBP investors being disappointed following a delay to a new UK-EU deal on the Northern Ireland protocol.
Sterling then rallied on the back of the UK’s latest PMIs. The UK’s vital services sector unexpectedly returned to growth in February, boosting Bank of England (BoE) interest rate expectations and catapulting GBP higher.
However, the GBP/CAD exchange rate was unable to consolidate at its best levels. The Pound fell victim to some profit taking in the latter half of the week. Despite some hawkish comments from the BoE’s Catherine Mann.
Meanwhile, the Canadian Dollar (CAD) initially faced pressure last week. The publication of a softer-than-expected domestic inflation reading cemented expectations the Bank of Canada’s (BoC) tightening cycle is over.
CAD exchange rates then rallied in the second half of the week. The ‘Loonie’ was bolstered by its positive correlation with the US Dollar (USD), in addition to a jump in oil prices.
Three Things to Watch out for This Week
- Canadian GDP
The focus for CAD investors this week will be the publication of Canada’s latest quarterly GDP release. Will weaker-than-expected growth in the fourth quarter drag on the ‘Loonie’?
- Windsor Framework
The announcement of a deal to resolve the UK-EU dispute over the Northern Ireland protocol has already brought some cheer to the Pound. But will hurdles in selling the deal to parliament undermine GBP?
- BoE Bailey Speech
Also influencing Sterling sentiment will be a speech by BoE Governor Andrew Bailey. If he reiterates the need to bring inflation back within the bank’s target range the Pound could strengthen.
Pound Canadian Dollar Outlook
The GBP/CAD exchange rate is likely to remain sensitive to oil price dynamics. Potentially infusing the pairing with additional volatility.