The Pound Canadian Dollar (GBP/CAD) exchange rate strengthened last week, amid signs of sticky UK core inflation.
What’s Been Happening: Pound Firms amid Signs of Sticky UK Core Inflation
The Pound (GBP) began last week on unsure footing, with a lack of data sapping sentiment towards Sterling.
Tuesday’s publication of record-high wage growth sent GBP soaring, as the data prompted renewed Bank of England (BoE) interest rate hike bets. However, unemployment shocked investors by increasing, which placed a ceiling on GBP’s movement.
The consumer price index for July extended Sterling’s run on Wednesday, as investors shrugged off a significant cooldown in headline inflation. Core CPI held at 6.9%, further cementing BoE tightening bets.
Sterling’s fortune ran aground on Friday, following the publication of July’s retail sales data. Due to dismal weather and the cost-of-living crisis, sales slumped significantly more than forecast.
Meanwhile, the Canadian Dollar (CAD) traded in tandem with oil prices. This came despite hotter-than-expected inflation data, which did little to inspire the ‘Loonie’.
Data was in short supply over the week, leaving the commodity-linked currency to trade alongside oil prices. While some support came CAD’s way, its close correlation to the US Dollar (USD) capped any gains.
Three Things to Watch Out for This Week:
- UK PMIs
On Wednesday, Sterling may fall following the publication of the latest private sector indexes. Both the services and manufacturing sectors are anticipated to have weakened further in August.
- Canadian Retail Sales
The latest Canadian retail sales data is scheduled for print on Wednesday. A stall is forecast, which may weaken the ‘Loonie’.
- UK CBI Data
Later this morning, the Confederation of British Industry (CBI) is set to publish the latest industrial trends data. Will a fall in the index dent GBP?
GBP/CAD Outlook
For the rest of the week, oil price dynamics are likely to play a role in shaping the pairing. With prices currently volatile but trading at high levels, the commodity-linked ‘Loonie’ could strengthen if they improve.