During last week’s session, the Pound Canadian Dollar (GBP/CAD) exchange rate initially trended upward as a National Institute for Economic and Social Research (NIESR) research suggested that the UK would not experience a technical recession this year. However, disappointing UK GDP figures later in the week hurt the GBP/CAD exchange rate combined with rising oil costs.
In the first part of the week, the Pound (GBP) increased versus most of its competitors; however, market support for Sterling decreased as data released on Friday indicated an economic slowdown.
In a hawkish speech on Monday, Bank of England (BoE) policymaker Catherine Mann suggested that the central bank will soon need to raise interest rates even higher.
Tuesday saw a temporary decline in GBP due to slower retail sales growth and more pessimistic BoE projections. Danny Blanchflower, a former BoE policymaker, criticized the central bank for raising interest rates repeatedly while predicting a collapse of the property market and a weakening of the economy.
But by midweek, Sterling’s hope had returned. Although it stressed that it will still seem like a recession to many, the National Institute for Economic and Social Research stated that the UK is likely to escape a “technical recession” in 2023.
The British pound reached its highest level against a number of competing currencies on Thursday, helped along by remarks from Andrew Bailey, governor of the BoE.
Due to poor GDP figures, support for the pound decreased towards the conclusion of the week. In December, the UK economy shrank by 0.5%, according to the most recent estimate from the Office for National Statistics (ONS). Despite these challenges, quarterly statistics indicated stasis rather than decline.
Although the UK officially avoided a recession, the economic outlook is still grim due to labor unrest and extremely high prices.
The Canadian Dollar (CAD) fluctuated in price last week, helped by higher oil prices but with gains constrained by the Bank of Canada’s dovish language (BoC).
The Ivey PMI for Canada was well above forecasts at the start of the week, supporting the loonie. It was the highest reading since May 2022, with businesses growing their personnel more quickly as inflation slowed down.
As oil prices, trade balance statistics, and BoC worry all moved exchange rates into Tuesday, the Canadian Dollar varied versus its counterparts. Although big losses were curbed by a rise in crude prices, traders were reluctant to make hawkish bets before a speech by BoC Governor Tiff Macklem.
Additionally, even though less than anticipated, December saw a decline in imports of consumer goods and exports of energy.
Due to the BoC’s dovish language, “Loonie” sentiment declined towards the middle of the week.
Due to its strong association with the US Dollar (USD) and a decline in Canadian government bond rates, the Canadian Dollar (CAD) continued to decline on Thursday.
The Canadian dollar, or the “Loonie,” looked to be headed for additional declines on Friday, but it quickly recovered in the European afternoon after Canada’s positive most recent jobs data. Although the nation’s participation rate climbed and salaries increased more than anticipated, unemployment stayed at 5% in January rather than rising as predicted.
Due to the absence of economic stimulus in Canada, the Pound Canadian Dollar exchange rate is projected to fluctuate heavily this week based on UK data.
The UK’s unemployment rate is predicted to remain unchanged in Monday’s jobs report, but average wages are predicted to have increased by 6.2%.
UK inflation is anticipated to continue in double digits later in the week, which might support GBP if investors think the BoE will increase interest rates further as a result.
However, disappointing retail data towards the end of the week might hurt sterling sentiment. Sales appear to have declined by 0.5% in January after declining 1% the month before.