Forecasts for CAD to GBP
Recent forecasts from CIBC Capital Markets and Scotiabank indicate some headwinds for the Canadian Dollar (CAD) in the near term against the US Dollar, which could also have implications for the CAD to GBP exchange rate. CIBC Capital Markets expects the CAD to weaken, with their year-end forecast for the USD/CAD rate in 2024 being raised to 1.31, up from 1.28. They also highlight optimism for the CAD in 2025, suggesting the potential for a weaker USD across the board. Scotiabank analysts have noted that the CAD has fallen short of Q3 2023 expectations against the USD and appears undervalued based on fundamental economic indicators. A possible increase in interest rates by the Bank of Canada, which the market may not have fully accounted for, could lead to a strengthening of the CAD nearer to the 1.30 mark by the late 2023. The Canadian economy shows signs of resilience, as indicated by robust employment figures, which may support economic activity; however, weaker labor markets toward the end of the year could signal further rate cuts and a potential weakening of the CAD.
On the other side of the pair, currency strategists from various institutions including Wells Fargo and TD Securities are sensing a tilt toward bearishness for the British Pound (GBP), with forecasts of a drop to 1.20 or below against the USD by early 2024. UK consumer confidence has waned, often a precursor to economic downturn, further justifying this cautious stance on the GBP. Given that GBP/USD is known for high volatility and is sensitive to economic data, political events, and changes in central bank policies, these factors could contribute to rapid exchange rate fluctuations. Furthermore, If the Bank of England ends policy tightening sooner than the market expects, Sterling could lose further ground.
Current market data shows the CAD to GBP exchange rate at 0.5852, which is marginally below its three-month average of 0.5925, and it has been relatively stable, trading within a 5.3% range. In the context of Canada as a significant oil exporter, the CAD could be influenced by oil price movements. Brent Crude OIL/USD prices have been 5.3% below the three-month average and exhibited considerable volatility, which is notable given the correlation between the CAD and oil prices. FX analysts will be closely watching these commodities and geopolitical developments, as they serve as potential indicators for future movements of the CAD, indirectly impacting the CAD to GBP exchange rate.
