The Pound Canadian Dollar (GBP/CAD) exchange rate slid to two-month lows last week, amid a series of bleak UK data releases.
What’s Been Happing: Pound Plunges after Troubling UK Data
While risk-on flows provided a promising start for the Pound (GBP) last week, it was unable to sustain its upward momentum.
On Tuesday, July’s jobs data weakened GBP rates. While they showed that wage growth remained at record highs, unemployment edged higher. Because of this, investors pared back their bets on additional tightening from the Bank of England (BoE).
This was followed midweek by a shock 0.5% contraction in the UK’s July GDP reading. With the UK economy already under pressure, renewed recession anxieties brought further losses for Sterling.
The Pound was able to gain some ground towards the end of the week, care of an upbeat market mood. However, it was unable to sustain a recovery and ended lower against most major peers.
Meanwhile, the Canadian Dollar (CAD) climbed last week as oil prices rocketed. OPEC, the oil producers’ organisation, continued cutting supplies with an aim to boost oil prices.
This pushed the commodity-linked ‘Loonie’ higher against most of its peers, despite a lack of other economic releases.
Three Things to Watch Out for This Week
- BoE Interest Rate Decision
The BoE is expected to announce a 25bps interest rate hike on Thursday. If the bank provides hawkish forward guidance, GBP could rally.
- UK Inflation
On Wednesday, a cooldown in core inflation may weaken GBP and take precedence over an uptick in the headline rate.
- Canadian Inflation
Tomorrow, the latest Canadian consumer price index is set to print. With both core and headline inflation expected to rise, renewed Bank of Canada (BoC) rate hike bets could boost the ‘Loonie’.
Later in the week, the preliminary PMIs for September are scheduled for release. Markets forecast another contraction in the UK’s vital services sector, which could weigh heavily on Sterling.