The British Pound/Canadian dollar or GBP/CAD currency pair represents the value of the currencies of the UK and Canada. It is a cross-currency pair and is influenced by factors impacting the UK and Canadian economies.
As a moderately volatile pair, GBP/CAD is shaped by macroeconomic developments, interest rate differentials, and commodity market trends, particularly oil. The Canadian dollar, often referred to as a “commodity currency,” is sensitive to fluctuations in oil prices due to Canada’s significant role as an energy exporter. The British pound reacts to broader risk sentiment and economic indicators specific to the UK.
GBPCAD Performance & Price Chart
While price movements of GBP/CAD are driven by monetary policy decisions by the Bank of England (BoE) and the Bank of Canada (BoC), as well as economic data such as inflation rates, employment figures, and GDP growth, changes in global oil prices play a role and can provide volatility in the pair.
For much of the last year or more, the GBP/CAD has been in a strong uptrend, hitting highs last seen in 2018. However, the rise follows significant gains made by the CAD in earlier years, particularly following the UK’s vote to leave the European Union.
GBP/CAD ended 2024 up approximately 7.5% for the year.
Timeframe | Performance |
---|---|
3 Months | +0.37% |
6 Months | +4.77% |
Year-to-Date | +7.49% |
1 Year | +7.68% |
Other Minor Currency Pairs
GBPCAD Forecast
In a recent article looking ahead to 2025, Forex.com senior market analyst Fiona Cincotta said that the UK economy is expected to continue to grow in 2025. However, she noted that “GDP could be weaker than the 1.5% forecast by the BoE owing to several key factors, including uncertainty surrounding trade and a less expansionary UK budget.” This would, of course, have a negative impact on the pound.
For the Canadian dollar, analysts at ING highlighted a “perfect storm” for the currency in a recent analysis piece. “The floor seems to be shifting under the Canadian dollar as risks of a US-Canada trade war, large Bank of Canada cuts, a soft outlook for oil prices, and now political turmoil have seriously dented the loonie’s long-held status as the safer option in the high-beta commodity currency space,” said the bank. They added that the question now is how far the Canadian dollar can depreciate.
Bullish GBP Argument: Overall, investors seeing further upside for the GBPCAD pair will, of course, point to the Canadian economic and geopolitical headwinds mentioned by ING above. More specifically, for the GBP, they may point to the UK’s diversified economy and its resilience in the face of global headwinds, which may provide a more stable backdrop for the pound compared to the Canadian dollar. Some also believe the UK will be less impacted by potential Trump tariffs.
Bullish CAD Argument: For the Canadian dollar, bullish GBPCAD investors may want to assess potential headwinds for the pound, such as weaker UK economic growth, economic policies, and a potential pullback in risk sentiment. For the Canadian dollar, a rebound in oil prices could help the currency and cap gains in GBP/CAD.
Our View: GBP/CAD remains a compelling pair for traders as there are solid bearish arguments on both sides. The pair’s trajectory in 2025 will likely hinge on the stability of oil markets, the potential Trump tariffs, and political goings-on in Canada.
Trading the GBP/CAD
The GBP/CAD offers opportunities for traders on both sides of the bullish/bearish fence due to the various factors mentioned above. Those trading the currency pair should:
Have a Clear Bias: If you want to trade GBP/CAD, it is important to have a clear reason to be bullish or bearish on the pair, whether that be based on fundamental or technical analysis. We have provided some factors to assess above, but an in-depth analysis should be conducted before implementing a directional bias.
Assess Energy Markets: As the CAD is heavily influenced by oil price trends, given Canada’s reliance on energy exports, traders should note the potential impact on their position if they trade the pair.
Tariffs: Both economies could be impacted by Trump tariffs in 2025. For investors/traders, it is important to assess what impact they could have on the respective economies and their currencies.