GBP/CAD Outlook:
Slightly positive, but likely to move sideways, as it is above its recent average yet lacks a clear driver.
Key drivers:
• Rate gap: The Bank of England is taking a more dovish stance compared to the Bank of Canada, which is maintaining cautious policy.
• Risk/commodities: The Canadian dollar weakened as oil prices recently dipped, which adds pressure to the CAD.
• One macro factor: Mixed signals from the UK economy, including rising inflation but stable retail sales, may create uncertainty for GBP.
Range:
Expect GBP/CAD to hold within its recent range, reflecting stability around current levels.
What could change it:
• Upside risk: A shift in the Bank of England's tone towards a more hawkish stance could boost the GBP.
• Downside risk: Continued declines in oil prices might further weaken the CAD, impacting GBP/CAD.