Bias: Bearish-to-range-bound, as the current level is below the 90-day average and sits in the lower half of the 3-month range.
Key drivers:
• Rate gap: The Bank of Canada has recently cut interest rates, which may weaken the CAD compared to the more stable approach of the Bank of England, hinting at potential rate cuts for GBP.
• Risk/commodities: Oil prices have risen substantially, which could support the CAD if this trend continues, given Canada's status as a major oil exporter.
• One macro factor: The UK is facing slow GDP growth forecasts and stagnant incomes, which may dampen the GBP's strength moving forward.
Range: The CAD/GBP pair is likely to hold within its current narrow range while facing sideways pressure.
What could change it:
• Upside risk: A significant rebound in oil prices could boost the CAD.
• Downside risk: Continued weakness in Canadian employment data might pressure the CAD further.