Ella 
The Pound Canadian Dollar (GBP/CAD) exchange rate witnessed fluctuations on Tuesday, responding to a surge in oil prices that initially bolstered the commodity-driven Canadian Dollar (CAD).
As of the latest update, the GBP/CAD exchange rate was trading at CAD$1.7057, showing minimal change from Tuesday’s opening rate.
The Canadian Dollar (CAD) displayed a lack of clear direction despite an initial uptick in oil prices and growing Canadian inflation. The ‘Loonie’ initially gained strength as escalating tensions in the Middle East propelled crude oil prices upward. Consequently, the commodity-based currency demonstrated resilience against weaker peers during the early European trading session.
Global markets experienced unease due to heightened geopolitical tensions, prompting a safe-haven rush among jittery investors. The secure US Dollar (USD) gained support as risk aversion influenced trade, leading to increased interest in the Canadian Dollar due to its positive correlation with USD gains.
However, later in the session, the release of Canada’s latest inflation data caused volatility in trading conditions. The data revealed a rise to 3.4% in Canadian Consumer Price Index (CPI). Royce Mendes, Head of Macro Strategy for Desjardins Group, noted that the stickiness in core inflation measures disappointed those expecting indications of possible rate cuts, making a March cut seem unlikely. Nevertheless, markets maintained optimism about a potential 25 basis point reduction by the Bank of Canada (BoC) in April.
Interest in the CAD remained mixed for the rest of the session as the currency struggled to establish a clear trajectory.
On the other side, the Pound (GBP) also experienced mixed trading throughout Tuesday’s session, fluctuating widely against major peers. A surprising downturn in UK average earnings reinforced expectations of possible Bank of England (BoE) interest rate cuts as early as March. Investors speculated that cooling wages might signal lower inflation, increasing the likelihood of monetary policy easing in the first half of the year.
Hannah Slaughter, a senior economist at the Resolution Foundation, commented on the data, stating that 2023 had been “a year of two halves for pay packets,” with strong growth in the first six months followed by minimal growth in the latter part of the year.
Looking ahead, the focus shifts to the upcoming release of the UK inflation data on Wednesday, with economists expecting a marginal cooling to 3.8%. Investors will closely watch for confirmation of falling inflation, potentially influencing rate cut expectations.
Simultaneously, Canada’s latest Producer Price Index (PPI) is scheduled for release tomorrow, forecasted to contract by 0.7%. A decline in factory inflation may undermine the Canadian Dollar, as markets often view PPI as a precursor to future inflation data, impacting expectations of BoC rate cuts.
