Author, Mike Smith
After the latest UK Budget announcement, I take a fresh look at the Pound to Canadian Dollar forecast for the rest of 2025 and into early 2026. Here’s my latest view on where GBP/CAD is headed and the factors now driving the rate.
What’s happening with the Pound to Canadian Dollar exchange rate?
The GBP to CAD exchange rate struck its highest level since late October at the end of last week.
Sterling briefly traded at close to $1.87 on Thursday.
However, the pair could not hold at this level and ended the week back in the $1.84s.
What caused the improvement for CAD last week?
Last Friday’s Canadian jobs figures provided the Canadian Dollar with a major boost.
Economists had forecast that the latest Canadian employment data would disappoint.
However, the figures showed an unexpectedly large drop in the level of local unemployment from 7.0% to 6.5%.
The Canadian currency immediately improved in response, with the Pound to Canadian Dollar rate moving lower.
What will determine levels for CAD in the near-term?
Wednesday’s Bank of Canada (BoC) interest rate decision is the major near-term risk event for CAD.
Futures markets are pricing-in a 93% likelihood that the BoC will keep its benchmark lending rate at 2.25%.
The markets move on surprises, and anything other than a ‘HOLD’ decision would therefore cause major movement for the Canadian Dollar.
The latest Canadian inflation data will provide the CAD with further direction.
A major drop from the latest annualised price rise figure of 2.9% will be needed to suppress support for CAD.
What’s happening with the Pound?
The Pound enjoyed a boost following UK Chancellor Rachel Reeves’ Autumn Budget Statement, delivered on 26th November.
The distinct lack of mis-steps from Reeves brought steady support for Sterling in subsequent sessions.
Robust demand for UK government debt from bond market participants in the final days of last month confirmed that a potential disaster had been averted.
Sterling steadily strengthened as a result.
How are UK interest rates affecting the Pound?
The Bank of England (BoE) makes its latest interest rate announcement on 18th December.
Futures markets are pricing-in a 90% likelihood that the BoE will cut its benchmark lending rate by a quarter of a percentage point.
The markets are forward-thinking, so a rate hike will not send the Pound sharply lower.
However, confirmation of a cut may see Sterling’s drift continue.
My near-term Pound to Canadian Dollar exchange rate forecast
I forecast that the Pound Canadian Dollar Exchange rate will continue to trend lower to $1.83 near-term.
A UK interest rate cut mid-month will be required for the pair to reach this level.
However, British jobs data (due for publication on 16th December) and domestic inflation numbers, released the day before, could pressure the Pound ahead of the BoE.
UK CPI inflation stands at 3.6%, well above the Government’s target of 2.0%.
If the data shows a figure closer to this target, the BoE will have increased leeway to talk about further UK rate cuts.
Such an outcome would send Sterling lower quicker.
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What is a good GBP to CAD rate?
Anyone looking to exchange Pounds into Canadian Dollars, or vice versa, is left with the problem of when to exchange their money – now or in the future?
If you are a buyer of Canadian Dollars, you want a high GBP-CAD rate.
If you are a buyer of Pounds, you want a low GBP-CAD rate.
The easiest way to tell if the GBP to CAD rate is good or bad is to compare it to historical exchange rates.
In my view, I wouldn’t go back much further than 10 years.
Once you start looking at even long-dated charts, you’re digging into data that is likely to be no longer relevant. Every decade has its specific events.
Over the last 10 years, the average GBP/CAD rate isn’t much different at $1.74 (source: Bank of England).
If the GBP to CAD rate is above its long-term average of $1.74, you can consider it a good rate for buyers of Canadian Dollars.
Conversely, if the GBP to CAD rate is below $1.74, it can be considered a bad rate.
It’s a simple yardstick to use.
The further the exchange rate is away from its average, the more extreme the move.
The GBP/CAD exchange rate can stray a long way from the average.
Over the past 10 years, the highest GBP/CAD rate was $2.0847 on 11 December 2015 – just before Brexit.
The lowest GBP/CAD rate in the past 10 years was $1.4707 on 28 September 2022 – the Pound fell considerably following the Liz Truss mini-budget fiasco.
There’s about a 30% swing from the high to the low!
Even over a regular week, you see swings of 2-4% quite frequently.
Bear in mind even small moves make a big financial difference to someone exchanging money.
That’s why keeping a close eye on the GBP to CAD rate is important.
GBP to CAD weekly forecasts
Forecasting exchange rates over a weekly period is a lot less complicated than longer timeframes.
Over a week, there is a smaller number of factors that can influence the GBP to CAD exchange rate.
Most of the important economic news is scheduled in advance. It allows people to see if anything critical is on the horizon.
One easy way anyone can keep tabs on upcoming news is to look at an economic calendar. I quite like the calendar by DailyFX because it’s got a simple, clear layout.
As currency brokers, we follow the economic calendar closely as it gives us a heads-up on potential risks.
In addition to economic news, you can also look at the GBP to CAD exchange rate for near-term price patterns.
Using price patterns to predict exchange rates is called technical analysis.
While there are many forms of technical analysis, I find the GBP/CAD technical analysis overview provided by investing.com useful.
Note – the page defaults to hourly analysis, but you can change the period to weekly or monthly to get a different perspective.
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Need some guidance on exchange rates?
Getting a good GBP to CAD exchange rate can make a big financial difference to you.
As I mentioned, you only have to take a quick look at a GBP to CAD chart to see plenty of big swings up and down.
It’s worth being proactive about.
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As part of our service, we will assist you with your payment set-up, guide you on current rates and market trends, and keep you informed from start to finish.
We can discuss with you and agree on the right time to exchange your money by understanding your requirements and taking advantage of favourable rate movements.
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