The Pound Canadian Dollar (GBP/CAD) exchange rate fell to a six-month low last week, as the UK economic outlook deteriorated.
What’s Been Happening: Pound Seesaws amid Darkening Economic Forecasts
Amid a cautious market mood, the Pound (GBP) began the week on poor footing. The increasingly risk-sensitive currency was unable to garner much support.
In addition, two financial firms published forecasts for the UK economy, which suggested long-term stagnation. This weighed heavily on Sterling, alongside increasing perceptions that the Bank of England (BoE) has reached its peak for interest rates.
Rate hike bets continued to diminish through midweek trade, which left the Pound moving listlessly against its peers on Thursday.
At the end of the week, an upward revision to the UK’s first-quarter GDP data brought some cheer to investors. However, this was swiftly offset by warnings of an impending recession, prompting a bleak end to the session.
Meanwhile, the Canadian Dollar (CAD) largely traded in tandem with oil price dynamics. The crude-linked ‘Loonie’ was unable to fully capitalise on recent gains, as prices weakened and strengthened on a day-by-day basis.
On Friday, the ‘Loonie’ fell significantly after the latest Canadian GDP data indicated stagnation within the Canadian economy.
Three Things to Watch Out for This Week
- Canadian Ivey PMI
The Canadian private sector index is due to print on Thursday, with economists forecasting a contraction in September. This may weaken CAD.
- Canadian Unemployment Rate
September’s Canadian unemployment rate is also due to print on Thursday. Will an uptick dent the ‘Loonie’?
- UK Final Services PMI
The final reading of the UK’s service sector PMI is scheduled for release on Wednesday. If it confirms weakness in the UK economy GBP may falter.
Pound Canadian Dollar Forecast
Elsewhere, oil price movements are likely to continue impacting the GBP/CAD exchange rate. Currently, crude prices are falling which is limiting the appeal of the commodity-sensitive ‘Loonie’. Further reductions could weaken CAD over the week.