Pound-to-Canadian Dollar Week Ahead Forecast: Still Under Pressure

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The pound will remain under pressure against the Canadian dollar in the coming five days.

The pound to Canadian dollar exchange rate (GBP/CAD) is consolidating following the sharp 1.0% decline suffered on Friday December 05, hugging the 1.8450 level during the course of the days that followed.

However, we're forecasting a drift below this level in the next five days: rallies are proving short-lived and weak and are capped by the 21-day exponential moving average, currently at 1.8730.

We saw two attempted rallies defeated by this level last week.

And with no break higher in sight, the charts tell us to expect a drift lower to extend.

The clear target is the horizontal graphical support at 1.8326, which has so often arrested GBP/CAD declines in the past year.

To be sure, there have been breaks below here, but this level represents the lower bound of a well-established range.

We don't see that range breaking this week, which tells us that although under pressure, GBP/CAD will find formidable support that will ultimately limit weakness

Disappointingly for those wanting a firmer GBP/CAD, the pound was unable to capitalise on the Canadian dollar softness that followed last week's Bank of Canada decision.

It kept rates unchanged but erred on the side of caution, downplaying recent above-consensus economic data prints. "Policymakers have adopted a more balanced view of recent improvements in hard economic data," says Taylor Schleich, an economist at National Bank of Canada.

Money markets have, over the past two weeks, lifted bets for an interest rate rise at the Bank in 2026, and this has conferred support to CAD over recent days.

We suspect the markets wanted to hear something from the Bank that verified those bets, hence the disappointment.

There are no top-line data or calendar events scheduled from Canada this week, which leaves us watching the U.S. for signals.

Indeed, GBP/CAD has been highly responsive to GBP/USD price action this year as correlations have tightened between the two, meaning any GBP/USD downside in response to U.S. data could drag GBP/CAD lower alongside.

With this in mind, we're watching Tuesday's U.S. non-farm payrolls print for evidence of further cooling in the U.S. jobs market.

Investors have ramped up bets for further Federal Reserve rate cuts in 2026 as the labour market has softened notably. The economic theory book says lower interest rates will boost businesses and household activity, saving jobs in the process.

But with sentiment having already shifted towards favouring more rate cuts, we think that the big payoff would favour bets for a stronger-than-expected print (anything above 50K).

This would see some of the recent build-up in bets for further easing fall away, boosting the dollar in response.

Here, GBP/CAD would also fall.

That being said, all the surveys point to a softening U.S. labour market and the official data will almost certainly confirm it.

If this is the case, then GBP/USD can rise further, helping GBP/CAD at the same time.

There's a very busy calendar from the UK to look forward to this week, which will see a jobs report, PMI release (Tuesday), inflation data (Wednesday) and the Bank of England decision on Thursday.

Risks are tilted to weak data, egging on bets for further Bank of England rate cuts, which would create a significant policy divergence between the UK and Canada (where no further reductions in the base rate are expected).

This should provide a strong fundamental case for further GBP/CAD weakness.