CAD/GBP Outlook:
The CAD/GBP rate is currently near its 3-month average and has shown stability recently, suggesting a likely sideways movement. As noted in Scotiabank's forecast, the outlook hinges on UK rate dynamics compared to oil-driven factors affecting the CAD.
Key drivers:
• Rate gap: The Bank of Canada maintains a higher interest rate compared to the Bank of England, influencing stronger capital flows into CAD.
• Risk/commodities: Recent stability in oil prices with Brent Crude OIL/USD trading significantly above its average has provided some support for the CAD, but any declines may pressure it.
• Economic performance: UK growth projections have softened, which may limit the GBP's strength going forward.
Range:
The CAD/GBP rate is likely to drift within its stable recent range without testing extremes.
What could change it:
• Upside risk: A sudden increase in oil prices could boost the CAD significantly.
• Downside risk: Further political instability or poor economic data from the UK could weaken the GBP, affecting the CAD/GBP rate negatively.