CAD/GBP Outlook: Bearish, as the rate is below its recent average and at 90-day lows, facing pressure from current economic indicators.
Key drivers:
• Rate gap: The Bank of Canada has recently cut interest rates, while the Bank of England's cautious approach suggests a slower decline, widening the gap.
• Risk/commodities: With oil prices at recent highs, the Canadian dollar may find support, though any softening could pressure the loonie further.
• One macro factor: Ongoing concerns regarding US tariffs are affecting the UK's export potential and may slow GDP growth, adding to the pound's weakness.
Range: The CAD/GBP is likely to remain range-bound, trading within its recent stable range as pressures balance.
What could change it:
• Upside risk: A significant drop in oil prices might lead to more aggressive rate cuts from the BoC, attracting investor interest in the CAD.
• Downside risk: Further deterioration in UK economic forecasts due to tariffs could amplify pressure on GBP, widening the rate gap.