Pound Canadian Dollar (GBP/CAD) Wavers as UK Economic Woes Linger
The Pound Canadian Dollar (GBP/CAD) exchange rate is trading narrowly this morning. Fears of soaring interest rates could tip the UK into a recession weigh heavy.
At time of writing, the GBP/CAD exchange rate is around $1.7125, relatively unchanged from this morning’s opening levels.
Pound (GBP) Undermined as Interest Rates Critically Impact the Economy
The Pound (GBP) is subdued this morning amid a lack of major economic data. Recession risks are deepening as the Bank of England (BoE) is expected to keep interest rates elevated for longer than expected.
UK inflation remains the highest amongst G7 economies, mainly due to strong wage growth and labour shortages. GBP investors are remaining quiet as they await further clues as to the central bank’s interest rate peak. With another 25bps rate hike expected in September, the cash rate will be pushed to 5.50%, as households will remain under pressure.
Furthermore, speeches from the BoE did little inspire confidence in GBP investors this week. BoE Chief Economist Huw Pill warned that the central bank will keep its restrictive monetary policy higher for longer to bring inflation down. Meanwhile, BoE Deputy Governor Ben Broadbent also warned that inflation will not fade quickly despite energy prices softening.
Canadian Dollar (CAD) Supported by Soaring Oil Prices
Meanwhile, the Canadian Dollar (CAD) is holding onto modest gains as WTI crude oil prices recover strongly amid a wavering market mood. After plunging below $80 a barrel last week, oil prices managed to rebound to near-monthly highs.
Elsewhere, the close trading relationship the ‘Loonie’ shares with the US Dollar (USD) could also be playing its part in keeping the former quiet. With major data releases upcoming for the ‘Greenback’, trading could be muted as investors shift to the sidelines.
The latest US non-farm payrolls could indicate the labour market is showing further signs of cooling, which could pare rate hike bets for the Federal Reserve. If the US Dollar slips, the Canadian Dollar could slide with it.
Pound Canadian Dollar Exchange Rate Forecast: Slowdown in Canadian GDP Growth to Weigh Heavy?
Looking ahead, the Pound Canadian Dollar exchange rate could see further movement with the latest economic growth data for Canada. After posting a 0.8% QoQ growth in Q1, the economy is predicted to grow 0.3% in Q2. The Canadian Dollar could slip if economic growth appears to be stalling.
Meanwhile, without any further data to be released until next week, Sterling could remain under pressure as recession risks linger.