The Pound Canadian Dollar (GBP/CAD) exchange rate climbed modestly through the week as Canadian inflation eased more than expected and the Bank of England (BoE) continued raising interest rates.
What’s Been Happening: GBP/CAD Exchange Rate Strengthens as BoE Hikes
The Pound started the week fairly quiet as investors awaited the latest inflation data and the interest rate decision.
Midweek and inflation accelerated once more and hit 10.4%, exceeding expectations. Against predictions of a 9.9% rise, headline CPI once again hit close to 40-year highs. Renewed rate hike bets from the BoE bolstered Sterling.
However, despite opting to increase interest rates for the 11th consecutive time, the BoE delivered a dovish statement. The central bank signalled a potential end to the tightening cycle, dampening investors’ moods.
End of the week and reassurances by BoE policymakers that the central bank would continue to rein in inflation buoyed the Pound. Retail sales surprised to the upside and increased 1.2% MoM in February, far above expectations.
Meanwhile, the Canadian Dollar (CAD) remained under pressure throughout the week as WTI crude struggled to breach $70 a barrel amid a wavering global market sentiment.
Further weighing on the ‘Loonie’ was lower-than-expected inflation data. Against expectations of 5.4% YoY, headline CPI printed at 5.2%, tempering further interest rate hike bets.
End of the week and the Canadian Dollar slipped further as dips in oil prices weighed heavily amid a turbulent market mood. Fears of a banking sector collapse sapped risk appetite, denting the ‘Loonie’.
Three Things to Watch Out for This Week
- UK GDP Growth
Despite an expected stagnation in the UK economy, an avoidance of a second consecutive quarter of contraction could buoy investors.
- Canada GDP Growth
Meanwhile, a rebound in the Canadian economy could spur the ‘Loonie’ as GDP is expected to expand by 0.3%.
- BoE Speeches
A flurry of speeches from policymakers could propel the Pound higher if hawkish tones are struck.
Pound Canadian Dollar Forecast
Elsewhere, continued fears of further escalation in the Ukraine invasion could weigh on global market sentiment, and could drag the Canadian Dollar lower.