Bias: Bearish-to-range-bound for CAD/GBP, as CAD sits below its 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: BoE policy rate remains higher than the BoC, keeping GBP cushioned and CAD under pressure on the pair.
- Risk/commodities: Oil sits near 90-day highs, bolstering CAD through Canada’s commodity link, though volatility can cap gains.
- One macro factor: Upcoming Canadian trade balance and employment data in January could swing CAD.
Range: CAD/GBP is likely to drift within the 3-month range, with a tilt toward the lower end and occasional tests of the near floor.
What could change it:
- Upside risk: Oil prices sustain gains, boosting CAD and pushing CAD/GBP higher.
- Downside risk: UK data beats expectations and BoE signals slower easing, lifting GBP and weighing on CAD/GBP.