The Pound-Canadian Dollar could stay supported if UK inflation keeps BoE hike expectations alive, although firmer oil prices may help the Loonie recover.
The Pound Canadian Dollar (GBP/CAD) exchange rate wavered last week amid rising oil prices and US-Canada trade tensions, before upbeat UK GDP supported Sterling.
At the time of writing, GBP/CAD was trading at CA$1.8764, up over 0.3% on the week and having struck a nine-day high.
Pound to Canadian Dollar (GBP/CAD): 1.875735 (-0.04%)
Euro to Canadian Dollar (EUR/CAD): 1.608386 (-0.03%)
Dollar to Canadian Dollar (USD/CAD): 1.38685 (-0.02%)
DAILY RECAP:
The Pound (GBP) was steady at the start of the week following as John Healey delivered his first major address as Chancellor of the Exchequer.
In his speech he outlined plans to support economic growth while reassuring markets that he would take a responsible approach to the public finances, with the comments offering modest support to GBP.
Sterling then struggled to establish a clear direction as a lack of major UK data left the currency trading largely sideways.
The Pound found firmer footing on Friday after the latest UK GDP figures showed the economy expanded by 0.3% in July, beating forecasts. The stronger-than-expected reading provided a boost to GBP and helped Sterling end the week on a positive note.
The Canadian Dollar (CAD) had a strong start to the week as escalating tensions in the Middle East saw oil prices surge, thereby boosting demand for the crude-linked ‘Loonie’.
CAD then relinquished some gains later in the week as the US-Canada trade war intensified, with Canada’s tariffs taking effect on Tuesday and US President Donald Trump retaliating by banning some Canadian goods.
Oil prices continued to rise, however, helping the Canadian Dollar stay supported.
Crude then eased back on Friday, leaving the ‘Loonie’ vulnerable to losses against the Pound.
Near-Term GBP/CAD Forecast: BoE Announcement Takes Centre Stage
Looking ahead, the UK’s latest labour market figures will kick off a busy week for the Pound. Unemployment is expected to have risen in the three months to July, which could weigh on Sterling if accompanied by softer wage growth.
Wednesday’s consumer price index could offer some support, with both headline and core inflation forecast to have increased in August. Headline inflation is expected to have climbed from 2.9% to 3.1%.
The focus will then turn to the Bank of England (BoE). With interest rates expected to remain unchanged, GBP will look to the bank’s forward guidance for direction. A cautious tone could pressure the Pound, while a more hawkish outlook may support it. The week’s employment and inflation figures could help shape the BoE’s message.
Finally, UK retail sales are forecast to contract in August, potentially adding further pressure to GBP on Friday.
For the ‘Loonie’, the key data release is Canada’s August CPI on Monday afternoon. If inflation held steady last month, CAD could be subdued.
Elsewhere, oil price dynamics will likely continue to drive movement. Could a deepening crisis in the Middle East see crude climb higher, thereby boosting CAD?
Our currency coverage draws on live market data, official economic releases and published bank research.
