CAD/GBP Outlook: Slightly weaker, but likely to move sideways, as the rate is currently below its recent average and near the lower end of its three-month range.
Key drivers:
• Rate gap: The Bank of Canada has recently cut rates to support growth, while the Bank of England signals a cautious approach to further cuts, favoring the GBP.
• Risk/commodities: Oil prices have risen to near 90-day highs, which usually supports the CAD; however, trade policy issues are offsetting this positive influence.
• One macro factor: UK growth projections are expected to slow, which may keep the GBP from gaining substantial strength.
Range: The CAD/GBP rate is likely to hold within its recent range but could drift as broader economic factors play out.
What could change it:
• Upside risk: A surprise interest rate hold by the Bank of Canada could bolster the CAD.
• Downside risk: Continued deterioration in trade relations with the U.S. could exert additional downward pressure on the CAD.