The Pound Canadian Dollar (GBP/CAD) exchange rate dropped last week as the UK’s economic health deteriorated.
What’s Been Happening: Pound Slides as UK Outlook Darkens
Initially, a lack of impactful data releases saw the Pound (GBP) start the week’s session on unsteady ground.
This light data calendar continued through to Tuesday, with GBP left vulnerable to analysis of the UK’s economic health.
Sterling saw further weakness on Wednesday following a severely disappointing slate of private sector indexes. Over August, both the manufacturing and service sectors contracted, sparking renewed recession anxieties amongst investors.
The Pound’s losses were extended on Thursday following the release of the Confederation of British Industry’s (CBI) distributive trades data. The CBI found that August’s retail sales had fallen at the fastest clip in two years, adding to concerns over the UK economy.
Meanwhile, the Canadian Dollar (CAD) endured volatile trade over the past week, owing to continued oil price fluctuations.
Initially, the crude-linked ‘Loonie’ whipsawed as oil prices hit almost $82.50 a barrel, before a fall back to $81.30 undermined CAD.
Later in the week, CAD was unable to capitalise on upbeat Canadian retail sales due to this same volatility.
However, as the US Dollar (USD) climbed towards the end of the week, the ‘Loonie’ found some cushioning from its positive correlation with USD.
Three Things to Watch Out for This Week:
- UK BoE Pill Speech
The Bank of England (BoE) Chief Economist Huw Pill could strengthen Sterling on Thursday, if he strikes a hawkish tone in his speech.
- Canadian GDP
The latest Canadian GDP data is due to print on Friday, with economists forecasting a sharp slowdown on a quarterly basis. Could this weaken CAD?
- Canadian Manufacturing PMI
On Friday, August’s Canadian manufacturing index is scheduled for release. Currently, economists expect a modest expansion in the sector, which may strengthen the ‘Loonie’.
GBP/CAD Outlook
Aside from this week’s economic data releases, oil prices could continue to influence the GBP/CAD exchange rate. Will the market remain turbulent, injecting volatility into the Canadian Dollar?