Pound Canadian Dollar Weekly Forecast: GBP/CAD Soars to 15-Month High

The Pound Canadian Dollar (GBP/CAD) exchange rate surged last week after better-than-expected UK data bolstered rate hike bets from the Bank of England (BoE).

What’s Been Happening: GBP/CAD Rallied on Elevated BoE Rate Hike Expectations

The Pound (GBP) started the week quietly until stronger-than-expected wage growth bolstered interest rate hike bets from the Bank of England (BoE). Despite the jobless rate climbing, record-high wage growth will leave the central bank little choice but to continue tightening, boosting GBP investors.

Further providing support to Sterling was better-than-expected GDP growth data. Even though a contraction was reported, the UK economy avoided a 0.3% slip and only declined by 0.1%.

Meanwhile, the Canadian Dollar (CAD) opened the week fairly supported after the Bank of Canada (BoC) opted to deliver a particularly hawkish 25bps rate hike. Stronger-than-expected consumer spending and a persistently tight labour market allowed the central bank to continue tightening.

However, things soon turned south through the positive correlation the Canadian Dollar shares with the US Dollar (USD). After softer-than-expected US inflation data, the ‘Greenback’ collapsed, and took the ‘Loonie’ with it. Significantly reduced rate hike bets from the Federal Reserve buoyed risk sentiment and global markets cheered as the Canadian Dollar tumbled to a 15-month low against the Pound.

Three Things to Watch Out for This Week

  1. Canada Inflation

Headline CPI is predicted to fall to 3%, the lowest level since June 2021. The ‘Loonie’ could slide as the BoC looks close to ending their tightening cycle.

  1. UK Inflation

Despite another significant cooling in inflation, the figure is expected to remain sky-high at 8.2%. GBP investors could be cheered on the prospect of further tightening, but mounting economic concerns could offset gains.

  1. UK Retail Sales

A predicted 0.2% decline in the retail sector could dent the Pound amid fears of weakening economic activity.

Pound Canadian Dollar Forecast

Elsewhere, oil price dynamics could continue to impact the pairing. Fears of a global slowdown could continue to impact WTI Crude oil prices. In turn, this could weigh on the commodity-linked ‘Loonie’.

Danny Tingle

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