The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated last week, amid elevated interest rate hike bets from the Bank of England (BoE) in the wake of stronger-than-expected UK inflation.
What’s Been Happening: GBP/CAD Exchange Rate Fluctuates on BoE Rate Speculation
The Pound (GBP) opened the week relatively quiet amid a lack of data before slipping on weaker-than-expected PMIs. The manufacturing sector slipped further into contraction territory whilst growth in the services sector slowed.
However, an upgraded economic forecast from the International Monetary Fund (IMF) buoyed investors, and the Pound recovered some of its losses.
In mid-week trade Sterling climbed on stronger-than-expected inflation. Against predictions it would ease to 8.2%, headline CPI came in at 8.7%. Core inflation also surprised to the upside and jumped to a 31-year high, stoking BoE rate hike expectations.
At the end of the week strong retail sales lifted the Pound. Recording a solid rebound from a disappointing March, sales in April improved by 0.5%. A resilient retail sector cheered investors heading into the weekend.
Meanwhile, the Canadian Dollar (CAD) traded erratically against most of its peers through the week amid a lack of major data.
Headwinds from the US debt limit talks persisted and kept a lid on the ‘Loonie’. The positive correlation the Canadian Dollar shares with the US Dollar (USD) infused volatility amid some back and forth over whether a deal will be reached in time.
A modest uptick in crude oil prices at the end of the week, then supported the ‘Loonie’ heading into the weekend.
Three Things to Watch Out for This Week
- Canadian GDP Growth
An expected 0.4% expansion in first quarter growth could boost the Canadian Dollar if forecasts prove true.
- BoE Rate Hike Bets
A relatively quiet week of data could see the Pound supported by elevated expectations of further tightening from the BoE.
- Oil Prices
An ever-fluctuating market mood could see oil prices remain volatile, keeping a lid on the ‘Loonie’.
Pound Canadian Dollar Forecast
Elsewhere, the ongoing debt ceiling negotiations in the US could continue to influence proceedings. If an agreement is reached, risk sentiment could improve, buoying the Pound.