The Pound Canadian Dollar (GBP/CAD) exchange rate seesawed last week, as the UK’s economic outlook grew muddled.
What’s Been Happening: Pound Wavers amid Mixed Economic Picture
The Pound (GBP) opened last week positively as investors bet on further tightening from the Bank of England (BoE).
However, GBP was undermined in the middle of the week, in response to downbeat economic forecasts. The National Institute of Economic and Social Research (NIESR) suggested that the UK was staring down five years of lost economic growth. They further added that there was a 60% chance of a recession in 2024.
Later in the week, a surprise increase in the UK’s GDP data saw Sterling make a recovery on Friday. The UK economy expanded by 0.2% in the second quarter, rather than stalling as forecast. The upbeat figures helped to underpin BoE rate hike bets.
Meanwhile, the Canadian Dollar (CAD) largely traded on oil price dynamics, as volatility struck the commodity over the week.
However, while oil prices climbed to record levels in the middle of the week, the crude-linked ‘Loonie’ was unable to capitalise. Due to its close correlation to a weakening US Dollar (USD), CAD saw limited trade.
At the end of the week, however, oil rebounded, allowing the ‘Loonie’ to grind higher.
Three Things to Watch Out for This Week:
- UK Inflation
Wednesday sees the release of the latest headline and core UK inflation data. Both figures are forecast to cool, which could dent GBP.
- UK Retail Sales
Later this week, the Pound could struggle if the UK’s latest retail sales data shows weakness as expected.
- CA Inflation
This afternoon sees the release of the latest Canadian inflation data. Could an uptick spark renewed rate hike bets and boost CAD?
GBP/CAD Outlook
This morning, the latest UK wage growth data printed at record highs, alongside a shock increase in unemployment. Continued analysis of the data is likely to shape GBP/CAD this week, as investors weigh up the BoE’s possible direction.