CAD/GBP Outlook: Slightly weaker, but likely to move sideways, as the rate hovers just below its recent average and lacks a distinct driver.
Key drivers:
• Rate gap: The Bank of Canada is maintaining its rate, while the Bank of England may cut rates later this year, creating a potential divergence that pressures the CAD.
• Risk/commodities: Oil prices are currently strong, trading above their recent average, which could support the CAD if prices remain high.
• One macro factor: UK inflation is expected to trend down to 2% by mid-2026, leading to cautious views on the GBP as growth slows.
Range: The CAD/GBP exchange rate is likely to drift within its stable range, given the recent position near the average.
What could change it:
• Upside risk: A resurgence in oil prices could strengthen the CAD significantly.
• Downside risk: Indications of a rate cut from the BoE could drag the GBP lower, affecting the pair.