Pound-to-Canadian Dollar Week Ahead Forecast: Selloff to Fade

Image © Adobe Images

Tariff uncertainty can forge a recovery in the pound to Canadian Dollar pair (GBP/CAD) over the coming week.

The exchange rate fell 0.84% last week but trades at 1.8468 at the time of writing Monday, up from Thursday's low of 1.8396.

GBP/CAD gains will have the U.S. Supreme Court to thank: it struck down a cornerstone of President Donald Trump's tariff policy on Friday that covers the "fentanyl" tariffs Trump imposed on Canada, China and Mexico last year.

On paper this should be good for CAD, but in reality it just raises uncertainty as Trump will engineer new angles to achieve his goals.

This uncertainty is particularly relevant to Canada, which counts the U.S. as its closest trading partner. In fact, no other country is as intimately intertwined with the U.S. economy in the manner that Canada is.

The setback for Trump comes ahead of the mid-year renegotiation of the USMCA trade agreement, already a source of uncertainty for the CAD. The U.S. might strike a harder position in these negotiations to make up for the 'fentanyl tariff strikedown.

Tariff developments coincide with renewed buying interest in GBP/CAD at around the 1.84 level, which is a long-running source of hard source of support.

In fact, the pair hasn't closed below here on a weekly basis since July 2025.

So we ask ourselves, what would it take to break that run? It would require a strong pro-CAD or bearish-GBP impulse and we don't see that coming from CAD given the renewed tariff uncertainty.

Neither do we see that coming from GBP given last week's big rerating lower in sympathy with the view that the Bank of England will lower interest rates in March. For GBP to fall further we'd need to see a discernible rerating towards a third rate cut for 2026, but there's no front-line data due this week to do that.

✳️  Secure today's exchange rate for a future payment. You may also book an order to trigger your purchase when your ideal rate is achieved. Learn more.

Meanwhile, last week's PMI survey data showed the UK economy picked up some momentum in February, extending January's uptick

If anything, UK data could come in better than expected in coming weeks, which limits downside in GBP. For GBP/CAD that ensures 1.84 is defended and could mean it rises back towards the centre of its 2025-2026 range near 1.8550

"Our expectation is that inflation will rise again by the year-end with persistence re-emerging as a challenge for policymakers, meaning the Bank of England is likely to keep policy relatively tight compared with several peers. This keeps front-end rate differentials elevated and provides cyclical support for GBP through the carry channel," says a new forecast note from Handelsbanken.