Author, Mike Smith
A GBP to CAD forecast predicts whether the exchange rate will be higher or lower in the future.
Exchange rate forecasts can help you decide when to exchange your money.
Will the Pound get stronger against the Canadian Dollar?
The Pound is in a good position to rise against the Canadian Dollar in 2023 and 2024 because it devalued so much in 2022.
The Pound hit a decade-low against the Canadian Dollar in 2022. It was an extreme move.
Exchange rates tend to revert to the mean unless there are major fundamental differences between the two countries that are permanent. We don’t see that here.
Here’s a bit of context as to what’s been happening with GBP to CAD.
Throughout much of 2022, the Pound devalued against the Canadian Dollar. In September 2022, the GBP/CAD rate reached its lowest point in the past decade. An extreme move!
Since the low point in September 2022, the GBP to CAD rate has begun to recover.
The British Pound to Canadian Dollar exchange rate has increased in 2023 but does not look overvalued.
Taking a broader perspective, the current GBP/CAD rate is below its long-term average of 1 Pound to $1.74 Canadian Dollars.
We don’t see any significant fundamental differences that warrant a low GBP/CAD rate.
The UK has struggled with higher inflation than Canada, but that gap is closing fast.
The 2024 economic growth for the UK and Canada is forecast to be similar levels (around 1%). That doesn’t look like an important driver at present.
Forecasting the GBP to CAD exchange rate is more about the likely future direction rather than coming up with a precise number at a particular point in time.
If you are reading some precise forecast online, I can assure you it’s pure fantasy. You will notice the methodology is either not mentioned at all or deliberately vague.
I do, however, appreciate that timing matters.
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GBP to CAD outlook for 2024
A good place to start for any exchange rate forecast is the economic outlook for both countries – in this case, the UK and Canada.
At present, the UK has higher inflation than Canada – around 6% versus 4%.
While this might seem like a bad thing for the UK economy, it is benefiting the Pound. Higher inflation leads to higher interest rates, which strengthen a currency. Put simply, the UK’s higher inflation rate is lifting the GBP to CAD exchange rate.
To combat inflation, central banks raise interest rates.
Higher interest rates attract foreign investors (they invest in the country that offers higher returns on their money).
Going forward, the Bank of England is expected to raise interest rates more than the Bank of Canada. That is likely to be a positive catalyst for the Pound.
We don’t foresee many more rate rises by the Bank of England. Futures markets are indicating UK rates may peak around April 2024.
As a whole, the GBP/CAD exchange rate has upward momentum in 2023 and we see this continuing into the first quarter of 2024. The GBP/CAD also remains below its long-term average.
Why exact GBP to CAD forecasts are fantasy
If you’ve been searching for an exact GBP to CAD forecast, you will have noticed that few websites provide exact forecasts.
There is a simple reason for this.
Exchange rates are very difficult to forecast to a precise level.
The more precise the forecast, the less I would trust it.
Why?
Daily, many economic and political factors influence currencies, like the British Pound and Canadian Dollar.
And beyond the news, you also have speculators actively trading the GBP-CAD exchange rate throughout the day.
It’s why you never see the GBP to CAD exchange rate sit still for long. It moves every 2-3 seconds.
The idea that anyone could bring all the fundamental factors together, forecast them accurately, weigh them accordingly, and then also anticipate the trading flows of millions of speculators around the world, and outpops a precise exchange rate forecast in a week, month, or year…well, that’s just pure fantasy.
I’m not saying you won’t come across any exact GBP to CAD forecasts.
But the people that make them are either:
- Seeking publicity
- Simply extrapolating the present
- Deluded
Most analysts fall into the first category.
Most economists fit the second category.
And most market oracles are deluded or flogging some trading product.
I appreciate anyone looking to exchange Pounds into Canadian Dollars, or vice versa, is still left with the problem of when to exchange their money – now or in the future?
It’s a fair question.
But instead of finding someone with a magical crystal ball, I would suggest using a common-sense approach to make the most from exchange rate movements.
What is a good GBP to CAD rate?
The GBP to CAD exchange rate tells you what each British Pound is worth in Canadian Dollars.
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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Unlike an impersonal bank or faceless online app, we will help you through the whole money transfer process.
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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