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Pound to Canadian Dollar Exchange Rate Forecast: Could GBP/CAD Still See Losses Despite BoE Hawkishness?

Canadian Dollar Currency Forecast

Pound to Canadian Dollar Exchange Rate Investors Anticipate Canadian Data Following BoE News

Despite markets firming on bets that the Bank of England (BoE) was preparing to hike UK interest rates as soon as May 2018, the Pound to Canadian Dollar (GBP/CAD) exchange rate remains near the week’s opening levels.

Due to broad Canadian Dollar (CAD) weakness and trade concerns, GBP/CAD surged from 1.7745 to 1.8264 last week.

However, this week the pair has remained near its opening levels after falling from Monday’s high of 1.8407 – which was the pair’s best level since the 2016 Brexit vote.

The Bank of England’s relatively hawkish tone in its March policy decision was not enough to help the Pound (GBP) to advance against a stronger Canadian Dollar, despite heavily hinting that it was preparing to hike UK interest rates in May.

Instead, investors are likely to await Friday’s Canadian data before making further moves on GBP/CAD.

Pound (GBP) Exchange Rates Supported by UK Retail and Wage Stats

Amid a surging Canadian Dollar, GBP/CAD could have seen further losses this week if not for supportive UK ecostats and of course rising Bank of England (BoE) interest rate hike bets.

Support for the Pound was bolstered on Wednesday by Britain’s January job market results, which impressed investors. Britain’s key unemployment rate unexpectedly improved from 4.4% to 4.3%, a 42 year low, while the employment change figure jumped to 168k.

UK wage growth beat expectations in January, with the print including bonuses rising to 2.8% and the previous figure being revised higher from 2.5% to 2.7%.

Thursday followed with Britain’s February retail sales results, which came in above expectations in most major prints.

Month-on-month retail sales jumped from 0.1% to 0.8% in February, double the expected 0.4%. The yearly figure only slipped to 1.5% from 1.6%, beating the forecast 1.3%.

Canadian Dollar (CAD) Exchange Rates Hold Steady on NAFTA Breakthrough Hopes

Despite broad market appeal in the Pound this week, the Canadian Dollar has been able to hold against Sterling gains.

This has largely been due to fresh market optimism that North American Free Trade Agreement (NAFTA) renegotiations will be successful, rather than collapsing as many investors had previously feared.

News that negotiators were closer to finding a solution to one of the US’ most contentious demands on car parts and imports left markets more hopeful that the US was also eager to renegotiate, and would not pull out of the deal.

According to economists from Goldman Sachs;

‘While NAFTA renegotiation remains a risk and adverse headlines are a clear possibility, a US withdrawal from NAFTA looks unlikely’

However, the Canadian Dollar’s strength has been limited too, by concerns about the possibility that the US may spark a global ‘trade war’ through protectionist rhetoric.

Pound to Canadian Dollar (GBP/CAD) Forecast: Canadian Retail and Inflation in Focus

Amid a lack of key UK data due for publication on Friday, the Pound to Canadian Dollar (GBP/CAD) exchange rate is more likely to be driven by Canadian data at the end of the week.

Friday will see the publication of Canada’s January retail sales results and February Consumer Price Index (CPI).

Canadian retail sales are forecast to improve to 1.1% month-on-month, while inflation is forecast to have slipped from 0.7% to 0.5%. Yearly inflation is expected to have risen though.

As Canadian retail sales and inflation have been underwhelming in recent months, better-than-expected results could boost Canadian Dollar demand and push GBP/CAD lower before markets close this week.

Of course, any further developments on US trade stances or the possibility of a ‘trade war’ will also influence movement in the risky trade-correlated Canadian Dollar.

As for the Pound, it is likely to remain relatively sturdy due to Bank of England interest rate hike bets, but unless more optimistic Brexit news is reported the British currency is unlikely to see another strong advance this week.

Instead, Pound investors will be anticipating next Thursday, when Britain’s final Q4 Gross Domestic Product (GDP) results will be published.