CAD/GBP Outlook: Slightly weaker, but likely to move sideways, as the CAD trades just below its recent average while lacking a clear driver.
Key drivers:
- Rate gap: The Bank of Canada has maintained its interest rates, reflecting stability, while the Bank of England is viewed with caution due to ongoing inflation concerns.
- Risk/commodities: Oil prices are currently at multi-month highs, which supports the CAD, yet the pace of gains has recently slowed, creating uncertainty in further strengthening.
- One macro factor: The recent retail sales and PMI figures from the UK exceeded expectations, which may stabilize the GBP but does not provide strong movement direction.
Range: The CAD/GBP is likely to hold steady within its recent trading range without clear upward or downward pressure.
What could change it:
- Upside risk: A substantial increase in oil prices could strengthen the CAD significantly.
- Downside risk: Any shift in UK economic indicators or renewed political uncertainty could weigh more heavily on the GBP, pulling the CAD down as a result.