The Pound Canadian Dollar (GBP/CAD) exchange rate softened last week, despite the Bank of Canada’s (BoC) decision to leave interest rates on hold.
What’s Been Happening: GBP/CAD Exchange Rate Weakens on Recovering Oil Prices
The Canadian Dollar (CAD) opened the week fairly muted amid a quiet trading calendar. A steady pickup in WTI crude prices helped support the commodity-linked ‘Loonie’, despite a softer-than-expected US inflation print weighing on the ‘Loonie’ due to its positive correlation with the US Dollar.
In mid-week trade the BoC announced its decision to keep the interest rate steady. While confirmation of the end of the BoC’s hiking cycle dragged on CAD, the BoC reassured investors that it will review its monetary policy as needed to reach the 2% inflation target.
WTI crude prices then bolstered the Canadian Dollar as prices rose 0.3% on the week, bolstered by a hawkish speech from BoC Governor Tiff Macklem to close out the week.
Meanwhile, the Pound (GBP) started the week on the front foot with upbeat retail sales. The British Retail Consortium (BRC) reported sales rose 4.9% YoY.
A hawkish speech from Bank of England (BoE) Governor Andrew Bailey lent some modest support to Sterling in the middle of the week. He reassured investors by insisting global financial instability would not detract the BoE from its monetary policy goals.
Later in the week the Office for National Statistics (ONS) revealed that the UK economy stagnated in February. Against expectations of a modest expansion, GDP growth came in at zero, triggering a Pound selloff.
Three Things to Watch Out for This Week
- UK Inflation Rate
Headline CPI is expected to ease to 9.8% after last month’s surprise uptick. If inflation eases further than expected, rate hike bets could be pared, denting Sterling.
- Canada Inflation Rate
Another expected substantial softening of headline CPI could dent the ‘Loonie’ as inflation is set to ease to 4.3% from 5.2%.
- UK Retail Sales
A predicted 0.5% decline in sales growth last month could sour Sterling sentiment following the previous 1.2% increase.
Pound Canadian Dollar Forecast
Elsewhere, WTI crude could continue to support the ‘Loonie’ if the price per barrel stays above $80.