Pound Canadian Dollar Exchange Rate News: GBP/CAD Buoyed as UK Retail Sales Figures Beat Forecasts

November 18, 2022 - Written by John Cameron

STORY LINK Pound Canadian Dollar Exchange Rate News: GBP/CAD Buoyed as UK Retail Sales Figures Beat Forecasts

GBP/CAD Exchange Rate Strengthens amid Upbeat UK Data

The Pound to Canadian Dollar (GBP/CAD) exchange rate was being supported by better-than-expected UK retail sales figures on Friday.

At time of writing the GBP/CAD exchange rate traded at around CA$1.5895, up roughly 0.5% from Friday’s opening levels.

Pound (GBP) Strengthens as UK Retail Sales Beat Expectations

The Pound (GBP) was up against the majority of its peers on Friday as hotter-than-expected UK retail sales data cheered investors.

Offering a slight reprieve from the UK’s gloomy economic outlook, UK retail data outpaced expectations on Friday. Retail sales had been revised down to -1.5% in September and were expected to rise 0.3% in October. But Friday’s data reported sales growth increased by 0.6%.

This bright spot came amid a sea of gloomy economic news. The UK economy is at the start of a downturn, prompted by high inflation and cost-of-living pressures. According to the Office of National Statistics (ONS) the only retail sector to weaken this month was food, which fell by 1% as consumers became more conscious about spending decisions.

Jacqui Baker, Head of Retail at Audit, Tax and Consulting Firm RSM UK said that sale figures will likely come under pressure going forward:

‘Although there was an uptick in retail sales last month, driven by clothing up 2.5%, it’s hard to ignore what’s likely to be a bleak winter ahead. Consumers are looking at how they can tackle the fallout from the cost-of-living crisis in their spending decisions’.

As such the Pound’s potential was capped on Friday as investors continued to brace for the impact of a winter recession and deepening cost-of-living crisis.

Canadian Dollar (CAD) Under Pressure amid Slump in Oil Prices

The Canadian Dollar (CAD) was struggling against most of its peers on Friday, weighed down by falling oil prices.

At the time of writing WTI Crude oil was trading around $81 per barrel, down roughly 8% on the week. This slump in oil prices came as demand for the commodity continued to weaken, causing headwinds for the oil-linked Canadian Dollar.

Aggressive monetary policy tightening is stoking recession fears in the oil markets, which is dragging down prices. If central banks continue to increase interest rates at the same pace, it’s possible it could trigger a global recession, which would sap demand further.

China’s increasing Covid cases are also underpinning this concern. As more regions enter lockdown, manufacturing will decrease. This combined with China’s delayed re-opening has dashed hopes that the country will increase its demand for oil.

Goldman Sachs analysts expect continued disruptions due to Covid before the gradual reopening of China can begin. On Friday they said:

‘Covid control measures such as targeted lockdowns and testing will still be implemented in places where there is local Covid resurgence, posting protracted disruptions to services and consumption over the next few months’.

As such, the ‘Loonie’ was on the backfoot on Friday as the oil markets were set to close the week sharply lower.

GBP/CAD Exchange Rate Forecast: CAD to Drop on Weak Retail Sales Figures?

Looking ahead to next week, the Pound Canadian Dollar could be driven by Canadian retail sales data.

On Tuesday Canadian’s data is expected to report sales growth fell from 0.7% to -0.5% in September. If this is true, then the Canadian Dollar could continue to face headwinds. If the sales figures print better-than-expected, then CAD’s losses could be limited.

Turning to the UK, investors will be focusing on public sector net borrowing on Tuesday. If the spending declines as expected, from £19.25bn to £12.1bn in October this could ease investors jitters about the UK’s debt levels, which could boost GBP.

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TAGS: Pound Canadian Dollar Forecasts