CAD Swings On Oil And BoC Signals

The Pound Canadian Dollar (GBP/CAD) exchange rate moved in a wide range last week, initially rallying to a three-month high before sliding to an eight-day low.

DAILY RECAP:

At the time of writing, GBP/CAD was trading at CA$1.8610, down around 0.5% on the week.

The Canadian Dollar (CAD) came under notable pressure at the start of last week’s session, after US President Donald Trump threatened Canada with a 100% tariff if the country made a trade deal with China.

As the US is Canada’s largest trading partner, this threat raised concerns about the impact such tariffs could have on the Canadian economy.

However, the ‘Loonie’ managed to recover quickly, initially thanks to a steady uptick in oil prices. Fresh threats of US military action in Iran saw crude prices climb, lending support to the commodity-linked Canadian Dollar.

CAD was also buoyed by the Bank of Canada’s (BoC) latest interest rate decision. The BoC left rates untouched, as expected, and sounded confident that further rate cuts were unlikely.

Meanwhile, the Pound (GBP) was left rudderless through last week’s session, with a notable lack of impactful UK economic data and few important domestic events on the calendar.

This left GBP to trade in a wide range, with movement primarily driven by swings in other currencies.

Although Prime Minister Keir Starmer travelled to China, where London and Beijing agreed new deals, this failed to boost the Pound as analysts said the agreements would have very little impact on the UK economy.

Near-Term GBP/CAD Forecast: BoE Decision to Buoy the Pound?

Looking forward, the focus for GBP investors this week is firmly on the Bank of England’s (BoE) interest rate decision.

With the bank broadly expected to leave interest rates unchanged, markets will be watching for hints of the bank’s monetary policy path moving forward. Any signs that the bank is cautious about further cuts considering how high UK inflation currently is could underpin the Pound.

As for the Canadian Dollar, Canada’s latest PMI results could dent CAD in the first half of the week, with economists anticipating ongoing contractions in both the manufacturing and services sectors.

Friday then brings Canada’s latest jobs report. Although the country’s unemployment rate is expected to have held steady in January, a drop in the employment change figure could undermine the ‘Loonie’.