The Pound Canadian Dollar (GBP/CAD) exchange rate jumped last week, hitting a near three-week high, as the UK’s final services PMI beat preliminary estimates.
What’s Been Happening: Pound Firms as UK Outlook Brightens
The Pound (GBP) initially wavered last week due to a light calendar of economic releases.
Wednesday saw an uptick in GBP rates, due to a better-than-expected services PMI. Activity in September was found to have contracted less than preliminary estimates.
These gains were furthered on Thursday, following Bank of England (BoE) Deputy Governor Ben Broadbent’s comments. He indicated that further interest rate hikes were ‘an open question’.
On Friday, a risk-on market impulse allowed Sterling to end the week on stronger footing against safer assets.
Meanwhile, the Canadian Dollar (CAD) traded largely on the back of oil price movement, due to its crude-linked nature.
Oil declined over the week, undermining the ‘Loonie’ despite robust Canadian economic data. The latest Ivey PMI printed above forecasts, but failed to inspire CAD.
Friday saw the Canadian Dollar attempt to gain some ground amid better-than-forecast employment data. Canada’s unemployment rate for September held at 5.5%, but volatility in the US Dollar (USD) stifled CAD’s gains.
So far this week, the commodity-sensitive ‘Loonie’ has strengthened against its peers. The conflict between Hamas and Israel has prompted concerns amongst investors that war could disrupt oil supplies. As such, crude prices have skyrocketed, boosting CAD exchange rates.
Three Things to Watch Out for This Week
- UK GDP
On Thursday, August’s UK GDP data is due for publication. Economists are anticipating a 0.2% expansion, which could calm recession fears and strengthen GBP.
- Oil Volatility
Following the escalation of conflict in the Middle East, oil prices have spiked significantly. If they continue to rally, CAD may strengthen accordingly.
- Risk Appetite
Amid ongoing geopolitical tensions, the market mood may remain downbeat. As the Pound is an increasingly risk-sensitive currency, it could slip.
Pound Canadian Dollar Forecast
The GBP/CAD exchange rate could face volatility this week, as markets respond to the unfolding crisis in the Middle East.