The Pound to Canadian Dollar (GBP/CAD) exchange rate recovered to 1.8895 at Friday’s close, reversing much of its early-week decline as Sterling strengthened following the Bank of England decision.
Canadian trade and employment figures will provide the main tests for the GBP/CAD this week.
WEEKLY RECAP:
GBP/CAD slipped below 1.8750 early last week before rallying through the final three sessions.
Pound Sterling drew support after the Bank of England held Bank Rate at 3.75%, with three policymakers voting for an immediate increase.
Governor Andrew Bailey played down the urgency of another move, and markets reduced their expectations for a September hike. Even so, UK yield spreads remain supportive enough to limit Sterling selling.
The Canadian Dollar also finished July on a firmer footing.
Canadian GDP rose 0.3% in May, beating forecasts, while April’s expansion was revised up to 0.6%. An initial estimate placed second-quarter annualised growth at 3.4%, comfortably above the Bank of Canada’s 2.5% forecast.
The stronger figures reinforced expectations that the BoC will leave rates unchanged over the coming months.
Scotiabank cautioned that the US-Canada yield gap remains “a formidable restraint on the CAD”, although recent price action suggests some momentum is shifting in the Loonie’s favour.
ING remains more guarded, arguing that the Canadian Dollar’s recovery should be slow because its carry appeal is limited and USMCA uncertainty remains a potential drag.
Near-Term GBP/CAD Forecast: Canadian Jobs Report Takes Centre Stage
For Pound Sterling, Monday’s final manufacturing PMI is followed by Wednesday’s services PMI and Thursday’s construction survey.
Another weak construction reading would reinforce the BoE’s cautious assessment of UK growth.
Canadian markets are closed for Monday’s Civic Holiday.
Tuesday brings Canada’s trade balance, forecast to narrow from C$4.2 billion to C$3.0 billion, followed by the manufacturing PMI.
Friday’s labour report is the main event. Employment is forecast to rise by 15,000, while unemployment is expected to remain at 6.5%.
Stronger hiring could support the Canadian Dollar and pull GBP/CAD towards 1.8750. A weak report, particularly alongside softer oil prices, could lift the pair through 1.90 and towards 1.9050.
Our currency coverage draws on live market data, official economic releases and published bank research.
