GBP Firms As Oil Prices Ease

The Pound to Canadian Dollar (GBP/CAD) ticked higher at the start of this week as oil prices trended lower through Monday’s session.

DAILY RECAP:

The Canadian dollar (CAD) was subdued on Monday as oil prices retreated, undermining support for the commodity-linked currency.

The absence of an immediate military escalation between the US and Iran encouraged investors to unwind defensive energy positions, prompting a modest decline in oil markets that sent Brent Crude sliding 0.8% to $65 per barrel.

However, markets remain alert to the possibility of a military strike still occurring by the end of the week, discouraging further weakness in oil.

At the same time, the ‘Loonie’ has seen little support from recent US tariff developments.

While US President Donald Trump’s IEEPA tariff regime was struck down by the US Supreme Court last week, CAD investors remain wary of the upcoming review of the USMCA trade framework, which is likely to be far more impactful on future US-Canada trade relations.

The Pound (GBP) trended broadly higher on Monday, with the currency continuing to draw support from recent positive UK economic indicators.

Surprisingly strong UK retail sales and PMI figures were accompanied by data showing a record budget surplus on Friday, painting a positive picture of UK growth at the start of 2026.

However, GBP investors have reason to remain wary ahead of the upcoming Greater Manchester by-election on Thursday.

The by-election threatens to apply another layer of risk to Sterling, as a poor performance by the Labour Party will undoubtedly revive speculation of a potential leadership challenge against Prime Minister Keir Starmer.

Near-Term GBP/CAD Forecast: BoE Testimony in Focus

Looking ahead, markets will look to remarks by Bank of England (BoE) Governor Andrew Bailey to drive direction in the Pound to Canadian Dollar (GBP/CAD) exchange rate on Tuesday.

Bailey will testify alongside fellow BoE policymaker Megan Greene before the Treasury committee and is expected to be grilled on the bank’s monetary policy outlook.

If Bailey concedes that the pace of interest rate cuts may accelerate in the coming months as inflation returns to target, the Pound is likely to stumble.

Meanwhile, in the absence of any notable Canadian data, movement in the ‘Loonie’ is likely to remain linked to oil price dynamics.