The pound and Canadian dollar will be assessed next week ahead of the release of September CPI and employment data. Attention will focus on the Bank of England's and Bank of Canada's rate hike outlooks, oil prices and developments in US-Canada trade tensions.
The pound is expected to trade next week with the focus on the September CPI due on the 21st and employment-related data due on the 20th. The Bank of England remains alert to inflationary pressure, and market expectations for a rate hike in November are in focus. Comments from the BOE's chief economist are also cited as a factor that could influence market views on the number of rate hikes over the next year.
August CPI rose to 3.1% year on year from 2.9% the previous month. If September CPI accelerates, concerns about inflation could intensify and provide support for pound buying. Conversely, if a slowdown in price increases and employment and wage growth is confirmed, the possibility of a period of excessively high rate hike expectations could recede. Retail sales and flash PMI data are also due on the 23rd, and the resilience of consumption and business activity is expected to be assessed.
The Canadian dollar will focus on September CPI following deterioration in the September employment report. Employment fell by approximately 68,300 in September, and the unemployment rate rose to 6.5%. The BOC's monetary policy outlook is also unsettled, making price trends the next focus. Headline September CPI is expected to rise 3.2% year on year, with growth in some core measures also expected to accelerate. If CPI exceeds expectations, rate hike expectations could recover and support the Canadian dollar, while a slowdown in price growth would likely heighten concerns about an economic slowdown and lead to Canadian dollar selling.
Trade tensions with the United States will also weigh on the Canadian dollar. Prolonged uncertainty over tariffs could affect Canada's exports and employment, while higher oil prices would support Canada as a resource-exporting country. However, higher oil prices could also complicate monetary policy decisions by pushing up domestic prices. Next week, the Canadian dollar is expected to be driven by efforts to gauge the BOC's policy outlook through CPI, as well as by US-Canada trade talks and oil market developments.