CAD/GBP Outlook: Slightly weaker, but likely to move sideways; the rate is below its recent average and recent lows without a clear driver.
Key drivers:
• Rate gap: The Bank of Canada cut interest rates recently, while the Bank of England has hinted at potential rate cuts, creating competing influences on their respective currencies.
• Risk/commodities: Oil prices are currently above their recent average, but persistent volatility may limit benefits for the Canadian dollar as falling prices could weigh on demand for Canadian exports.
• One macro factor: The UK's economic growth is projected to slow significantly due to stagnant household incomes and reduced public spending, leading to a cautious outlook for the British pound.
Range: The CAD/GBP is likely to hold steady within its recent 3-month range as market conditions remain mixed.
What could change it:
• Upside risk: A significant increase in oil prices could boost demand for the Canadian dollar, improving its value against the pound.
• Downside risk: Implementation of additional U.S. tariffs could exacerbate the UK's economic challenges, further pressuring the pound and impacting the CAD/GBP exchange rate negatively.
