The Pound Canadian Dollar (GBP/CAD) exchange rate saw some big swings last week, with Sterling managing to trend higher overall. This week, a forecast recovery in UK GDP and a pause in the Bank of Canada’s (BoC) tightening cycle could see GBP/CAD climb higher.
What’s Been Happening: GBP/CAD Volatile on Brexit News and BoE Rate Rise Bets
The Pound (GBP) rallied at the start of last week following the news that the UK and EU had struck a new deal on the Northern Ireland protocol.
Meanwhile, downbeat data weighed on the Canadian Dollar (CAD). Canada’s latest GDP growth rate revealed that the economy unexpectedly stalled in the fourth quarter of 2022. GBP/CAD soared to a one-month high.
However, the currency pair couldn’t hold its gains. Sterling slumped after Bank of England (BoE) Governor Andrew Bailey suggested that interest rates may have peaked.
The ‘Loonie’ was able to capitalise on GBP’s weakness thanks to a stronger-than-expected manufacturing PMI.
GBP/CAD managed to rally at week’s end. The UK’s services PMI beat preliminary estimates, boosting the Pound, while a drop in oil prices dented the commodity-linked Canadian Dollar.
Three Things to Watch Out for This Week
- UK GDP
Notable UK data is absent until the end of the week, when the GDP rate for January is out. Economists are currently forecasting a modest rise of 0.1%, which could lend Sterling support.
- BoC Rate Decision
The Bank of Canada is expected to keep interest rates unchanged, ending its aggressive tightening cycle. Any hints that the bank expects to cut rates later this year could hammer the ‘Loonie’.
- Canadian Jobs Data
CAD could face headwinds at the end of the week, with forecasters predicting a rise in Canada’s jobless rate and an easing of wage growth.
GBP/CAD Forecast
Overall, this week could bring further gains for the GBP/CAD exchange rate, if the upcoming events on the economic calendar play out as expected. Other factors that could create volatility are news of the Northern Ireland protocol deal for the Pound and oil prices for the commodity-linked Canadian Dollar.