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The Canadian Dollar is benefiting from the U.S. Dollar's rebound.
The Pound to Canadian Dollar exchange rate (GBP/CAD) can recover some recently lost ground; however, any gains will likely be sold into as a multi-week decline evolves.
The annotations on the chart below simplify our view on what the GBP/CAD might do:
Our expectation for a brief move higher is in response to the exchange rate deviating from its nine-day exponential moving average (EMA) to the extent that it is looking somewhat oversold.
Exchange rates tend to mean-revert to their nine-day EMA when volatility is low, as is currently the case, meaning a retracement becomes increasingly likely in the coming hours and 1-2 day timeframe.
But we think GBP/CAD strength will be short-lived and sold into by traders: The Canadian Dollar has entered a period of recovery against the British Pound, which means we hold a view that GBP/CAD strength will be limited and that we are on course for a test of 1.83 eventually.
The Canadian currency is closely correlated to the U.S. Dollar, thanks to geographical proximity, which means it has struggled in 2025 as its southern neighbour sells off.
The close correlation of course means that when USD recovers, so too can CAD. With this in mind, we look for the USD to extend its current recovery this week, helped by what should be a supportive U.S. inflation reading on Tuesday.
As we note here, we think U.S. inflation figures pose a win-win for the Dollar as a below-consensus reading will boost U.S. stocks (good for the dollar) and an above-consensus reading will boost U.S. bond yields (also good for the Dollar).
This win-win environment is largely testament to the sense that the Dollar is proving immune to U.S tariff headlines for the time being, with markets betting that U.S. President Trump will agree a number of deals before the August 01 deadline.
And if past form is anything to go by, the deadline will be extended again to allow any outstanding issues to be agreed.
If the next couple of weeks prove benign and the Dollar can recover further, we think it will play supportive of CAD, and keep GBP/CAD pressured.