The Pound Canadian Dollar (GBP/CAD) exchange rate climbed steadily through the week as the Bank of Canada (BoC) became the first major bank to pause its monetary tightening cycle.
What’s Been Happening: GBP/CAD Exchange Rate Firms as BoC Halts Rate Hikes
The Canadian Dollar (CAD) opened the week on the back foot as Ivey PMI printed below expectations as economic activity eased in February.
The selling pressure then intensified after the Bank of Canada (BoC) delivered a dovish statement to accompany the expected pause in the interest rate hiking cycle. Reinforcing expectation the central bank will leave its monetary policy unchanged through the remainder of 2023.
The ‘Loonie’ extended these losses after dovish comments from BoC Senior Deputy Governor Carolyn Rogers. Rogers defended the bank’s policy by reiterating their commitment to tailoring the monetary policy to Canadian circumstances.
Meanwhile, the Pound was under pressure at the beginning of the week as domestic headwinds occupied investors’ focus.
A dovish speech from BoE policymaker Swati Dhingra failed to boost the Pound as she warned that further rate hikes ‘pose material risk’. Calling for a pause in interest rate increases, Dhingra urged the central bank to halt its monetary policy cycle.
At the end of the week Sterling found some strength as the UK economy unexpectedly grew 0.3% MoM in January. Beating a forecast increase of 0.1%, and much improved over the 0.5% drop the previous month.
Three Things to Watch Out for This Week
- US Inflation Rate
The latest headline CPI for the US prints on Tuesday. An expected easing could pare rate hike bets further, buoying the global market mood.
- UK Spring Budget
Chancellor Jeremy Hunt will unveil the UK government’s tax and spending plans. GBP investors will be looking for some solid economic growth plans.
- Oil Prices
Fluctuating oil prices could continue to weigh on the ‘Loonie’. WTI Crude is struggling to find strength above $75 a barrel.
Pound Canadian Dollar Forecast
Elsewhere, ongoing headlines out of Ukraine or China could continue to influence global market sentiment.