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Pound to Canadian Dollar Exchange Rate Forecast: Will Higher UK Inflation Rates Boost GBP/CAD?

Canadian Dollar Currency Forecast

Will GBP/CAD Exchange Rate Rise on Rising UK Inflation Rates?

A quiet end to the week has left the Pound to Canadian Dollar exchange rate (GBP/CAD) slightly higher at a rate of CA$1.7062; this is below the week’s best rate of CA$1.7180.

Scrutiny of the UK’s latest no-deal Brexit papers has limited GBP/CAD exchange rate gains, but Sterling still remains the stronger currency in the pairing.

Looking ahead to the coming week, the GBP/CAD exchange rate might be affected by UK inflation rate data on Monday if it reveals a faster pace of price growth.

Higher inflation puts more pressure on the Bank of England (BoE) to raise interest rates, so a forecast-matching rise could be enough to boost Pound Sterling demand.

While higher inflation would also risk UK households facing another wage squeeze, the implications for future BoE policy could outweigh any negative trader sentiment.

Risk of GBP/CAD Exchange Rate Losses on Next Week’s Inflation Rate Figures

Looking ahead, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could decline when next week’s retail sales data comes out on Thursday.

The stats for August are predicted to show a slowdown in activity levels on the month and the year for the base readings, alongside those excluding fuel sales.

A reduction in retail sales activity could mean that the Pound falls in value and declines against the Canadian Dollar, given the negative implications of such data.

As well as the immediate hit that the retail sector would experience, a slowdown could also lead to reduced UK GDP growth in the future.

Will the Canadian Dollar to Pound (CAD/GBP) Exchange Rate Drop on Slower Inflation and Falling Retail Sales?

The Canadian Dollar (CAD) has fallen against the Pound (GBP) over recent weeks and might be on track for further losses on Friday next week.

Canadian data out on 21st September will include inflation rate readings for August, alongside retail sales stats for July.

The inflation rate figures are considered the more high-impact news, as these affect the likelihood of a future Bank of Canada (BOC) interest rate hike.

Unfortunately for CAD traders, current expectations are for a slowdown in the rate of price growth with a shift from 3% to 2.8% for August’s year-on-year reading.

Core annual price growth is also tipped to slow, alongside a potential dip in monthly inflation from 0.5% to 0.2%.

Lower inflation will reduce the odds of a near-term BOC interest rate hike and could mean that the Canadian Dollar falls against the stronger Pound.

The situation may be little better with the later Canadian retail sales data, which is expected to show a year-on-year slowdown in sales activity from 3.8% to 3.6%.

If both results print as expected then the Canadian Dollar could make clear losses against the Pound at the end of next week.