This afternoon the latest inflation data will be released for Canada and is expected to show a slight improvement of 0.2% compared to July last year.

The Bank for Canada raised interest rates 6 weeks ago and a strong reading on inflation may start to see hope of a further interest rate hike. The GBP/CAD rate has been falling for the past few weeks, apart from during the last 2 days where Sterling has gained back some of the lost ground. This could be set to reverse again though, especially if a Canada interest hike looks more likely.

The Canadian economy has been performing impressively this week and I wouldn’t be surprised if the data came out better than expected.

Oil prices settle

One of the other main reasons for CAD strength is the calming of the price of oil, there has been relatively little movements in the price of oil, which is currently sitting around the $50 a barrel level. As oil is Canada’s main export, accounting for over a quarter of their trade income, any major movement in the price of oil can have a direct impact on their economy and the Canadian Dollar’s value.

Where next for Pound to Canadian Dollar exchange rates?

With the release of inflation data today there is an argument that we could see the GBP/CAD rate at the 1.60 level in the near future. However, Canada has had such strong data in the past few months, there is an argument that it’s not sustainable.

Also, the Pound could also start to see a change of events, there is going to be more information released by the UK Government about what route they’re planning for Brexit. There is expected to be 12 white papers laying out plans for Brexit. Two of these have already been released with two more expected to be released on Monday. Any clarity on the future of the UK after Brexit will be greatly received by UK markets and could see Sterling’s recent form improve.