CAD/GBP Outlook: Slightly weaker, but likely to move sideways, as the rate sits below its recent average, constrained by local economic pressures.
Key drivers:
• Rate gap: The Bank of Canada has recently lowered interest rates, while the Bank of England is expected to cut rates further, maintaining a broad divergence that may favor the GBP.
• Risk/commodities: Recent oil prices have increased above their average, which can initially support the CAD, but the falling demand due to U.S. tariffs weakens that impact.
• One macro factor: The latest warnings regarding potential U.S. tariffs threaten the UK’s economic stability, causing uncertainty for the GBP.
Range: Movement for CAD/GBP is likely to hold within the current 3-month range, maintaining stability amidst fluctuating economic indicators.
What could change it:
• Upside risk: A substantial rebound in oil prices could boost the CAD’s performance.
• Downside risk: Any negative developments regarding U.S. tariffs impacting the UK could weaken the GBP further, leading to increased volatility.