The Pound Canadian Dollar (GBP/CAD) exchange rate wavered throughout the week amid further tightening expectations from the Bank of England (BoE) and a fluctuating oil market.
What’s Been Happening: GBP/CAD Trades Erratically amid Volatile Market Mood
The Pound (GBP) opened the week moderately supported despite a lack of economic data. With inflation remaining sticky, markets began pricing in further tightening from the BoE. Expectations of the BoE to raise interest rates to 5.5% by the autumn kept Sterling afloat.
End of the week and the Pound encountered some resistance despite a buoyant market mood. Despite a better-than-expected manufacturing PMI, the sector remains in contraction territory. A weakening domestic market sentiment weighed heavy on GBP.
Meanwhile, the Canadian Dollar (CAD) started the week off quietly amid a lack of data, but optimism over the US debt ceiling negotiations edging closer provided a modest boost. A volatile oil market, however, kept a firm lid on the ‘Loonie’.
Midweek and stronger-than-expected GDP growth buoyed CAD investors. Against predictions of 0.4% growth, the Canadian economy grew by 0.8% in the first quarter of 2023. However, fluctuating oil prices continued to cap CAD as WTI crude struggled to breach the $69 a barrel mark.
At the end of the session, a modest recovery in WTI crude prices helped boost the Canadian Dollar, as well as the approval of the US debt ceiling being raised.
Three Things to Watch Out for This Week
- Oil Prices
In the wake of the OPEC+ announcing output cuts through to 2024, WTI crude prices could recover substantially, boosting the commodity-linked ‘Loonie’.
- BoC Interest Rate Decision
The Bank of Canada (BoC) is expected to keep rates unchanged for the third straight meeting. Any hints at future policy could spark movement in CAD.
- BoE Rate Expectations
Amid a notable lack of UK economic data, BoE bets could continue to affect the Pound. Will hawkish expectations keep GBP afloat?
Pound Canadian Dollar Forecast
Elsewhere, an expected fifth consecutive month of expanding economic activity in Canada could buoy the ‘Loonie’. The Ivey PMI is expected to print at 57.2, highlighting a resilient economy.