Exchange rate volatility for the British Pound to the Canadian Dollar as Industrial Action Rises
Due to ongoing domestic problems weighing on Sterling on Wednesday, the Pound Canadian Dollar (GBP/CAD) exchange rate saw volatile circumstances. The GBP/CAD currency rate was barely moving from the opening levels at the time of writing, trading at about $1.6414.
Financial difficulties Pressure the Pound (GBP)
The Pound is still experiencing severe economic problems, as the faltering manufacturing industry entered a recession after six straight months of declining activity. The currency has also been hit by the slowest increase in housing prices since the epidemic.
Real-term salaries have been sharply falling as employees from a variety of sectors, including rail, public sector, and teaching, went on strike. The economy is anticipated to suffer as a result, and the pound will come under even more pressure.
The manufacturing sector has entered a recession, marking the sixth month in a row of declining activity, despite the better-than-expected numbers. Work orders have reportedly continued to fall, and procuring supplies has gotten harder, according to Rob Dobson, Director at S&P Global. “UK manufacturers experienced a challenging operating climate at the start of 2023, leading to limited intake of new business, falling production volumes, and reduced personnel levels,” according to Dobson.
Amid Uncertain Oil Prices, the Canadian Dollar (CAD) Faces Difficulties
Investors are getting ready for the Federal Reserve to announce its interest rate decision, but the Canadian Dollar (CAD) is having trouble determining its direction. The CAD has been impacted by the results of different economic indicators, including weaker-than-expected data from China and a stronger-than-expected Canadian manufacturing PMI. For the first time since July 2022, the Canadian manufacturing sector increased in January, moving from 49.2 to positive territory.
The erratic oil markets continue to have an effect on the commodity-linked “Loonie,” as WTI crude tries to break the $80 per barrel barrier. The Canadian Dollar has been hampered by fluctuating risk sentiment and decreased demand.
Forecast for the GBP/CAD exchange rate: A move by the Federal Reserve might strengthen the loonie
The Federal Reserve’s interest rate decision may cause the exchange rate between the British Pound and the Canadian Dollar to fluctuate more. Investors anticipate a hawkish tone to accompany the decision, which might strengthen the US Dollar, even if a dovish 25 bps rate rise is anticipated. This might cause the value of the “Loonie” to increase.
Investors in GBP will be watching Thursday’s Bank of England (BoE) interest rate announcement. Although another rate increase of 50 basis points is anticipated, the UK’s dismal economic climate may overshadow the central bank’s aggressive rate cycle.