The Pound Canadian Dollar (GBP/CAD) exchange rate fluctuated last week, as the UK’s latest GDP data proved underwhelming.
What’s Been Happening: Pound Undermined by Downbeat GDP Data
Last week, the Pound (GBP) began on poor footing, as a lack of data left Sterling vulnerable to shifts in the market mood.
Tensions between Hamas and Israel flared, which weighed significantly on risk appetite across markets. This meant the increasingly risk-averse Pound was unable to find support.
Sterling slipped further on the back of September’s UK GDP data. August’s data reported a 0.2% expansion in the UK economy, but this was offset by a downward revision to July’s reading. The increase also wasn’t enough to suggest that the UK economy may avoid a recession, which further limited GBP.
Fears over the UK’s economic outlook kept a lid on Sterling through to the end of the week’s trade. However, Friday brought some strength against other currencies amid increased Bank of England (BoE) rate hike bets.
Meanwhile, the crude-linked Canadian Dollar (CAD) traded largely in tandem with oil prices last week.
As the conflict between Hamas and Israel developed, oil prices began to rally. Markets were concerned that nearby oil-producing countries could become embroiled, which would affect supply.
However, prices were volatile over the week, which saw the ‘Loonie’ fluctuate in line with prices. Towards the end of the week, prices climbed once more, sending the GBP/CAD exchange rate lower.
Three Things to Watch Out for This Week
- UK Inflation
Wednesday sees the release of September’s UK inflation data. Cooldowns are expected across both core and headline inflation, which could dent GBP.
- UK Retail Sales
On Friday, the UK’s retail sales data for September is due to print. Economics forecast a fall of 0.1%, which could weaken Sterling.
- CA Inflation
September’s Canadian inflation data is due this afternoon. Could a hold at 4% boost Bank of Canada (BoC) rate hike bets and strengthen CAD?
Pound Canadian Dollar Forecast
The GBP/CAD exchange rate is likely to see further volatility this week, as markets keep an eye on the Hamas-Israel conflict. If oil prices remain elevated the commodity-sensitive ‘Loonie’ could strengthen.