Image © Adobe Images
The Canadian dollar will stay on the back foot against the pound for as long as weak jobs data and U.S. tariffs keep Bank of Canada hike bets in check, leaving sterling buyers pressing at the top of their short-term range.
The pound-to-Canadian dollar exchange rate starts the week at 1.8896, at the top of its short-term range, after the Canadian dollar extended its losses on Friday's weak jobs report.
Canadian employment fell for a third consecutive month in October, and the soft figures have led economists to push back expectations for a second Bank of Canada rate hike.
The Bank of Canada's Summary of Deliberations and Thursday's UK GDP figures are the week's main events for the pair.
GBP/CAD is testing the upper of the two tramlines on the chart, the horizontal red line at 1.8900, with the purple line at 1.8711 marking the base of the range:
Above: GBP/CAD daily chart with the 21-day (blue) and 100-day (red) moving averages and the range lines at 1.8900 and 1.8711. Image © Pound Sterling Live, chart created with TradingView.
The 100-day moving average, the red curve, is the centre of gravity for GBP/CAD; it has flattened since October after a steady climb through the summer, and the 21-day average, in blue, has turned higher beneath it this month.
The 1.8900 line has capped GBP/CAD on a closing basis since late August, and together with the 100-day moving average it can make the going a little harder for buyers.
A break above the line opens 1.90 and then the 2026 high at 1.9044, set on 7 July.
The 1.8711 line, the base of the range, is the first major support beneath the 100-day moving average.
There is clearly a degree of short-term momentum on the chart, and Pound Sterling Live would be hesitant to stand in the way of buyers here. A daily close back beneath 1.8810 would change the near-term Pound to Canadian Dollar forecast.
Further out, a sustained break above 1.8900 would lift GBP/CAD out of the range it has held since August and set its direction into December.
Last week Pound Sterling Live looked for GBP/CAD's recovery to stall at 1.8810, with a daily close above the line opening the way to 1.89. The pair closed above 1.8810 on 4 November, the day before the Bank of England's rate hike, and reached 1.89 on Monday.
The Loonie Needs a Turn in Canadian Data to Recover
The Canadian dollar's weakness follows Friday's labour force survey, which showed employment falling by 4,700 in October against expectations for a 15,000 gain, with the unemployment rate rising to 6.7% from 6.5%.
"Three monthly declines in a row is a trend that is hard to ignore," says CIBC's Andrew Grantham.
"The recent trend in the labour market suggests that slack is opening up again in the economy and supports a hold at that time," he adds, referring to the Bank of Canada's December meeting.
Goldman Sachs now expects the Bank to hold in December and hike in January, as "benign domestic data and renewed trade tensions will keep the BoC on hold at its December meeting."
Why does a delayed rate hike weigh on the Canadian dollar? Investors expect to earn less on Canadian deposits and bonds than they had planned for, which reduces demand for the currency.
U.S. tariffs add to the pressure, with Canadian exports of products targeted by the new 50% tariffs "down 28% year-over-year in September after rising 40% year-over-year in August," says Salim Zanzana, economist at RBC.
Lower oil prices also weigh on the Loonie, which "may underperform many of its peers given its residual sensitivity to oil," says Karl Schamotta, Chief Market Strategist at Corpay.
However, Crédit Agricole says any reversal of tariffs "could be somewhat more positive for the CAD than for the USD."
The Bank of Canada's Summary of Deliberations from its October meeting will show how close policymakers are to a second hike, and CIBC expects it "has to sound hawkish for a meeting that ended up with a decision to raise rates."
Under the playbook, a hawkish summary would support the Canadian dollar and pull GBP/CAD back from 1.8900. A summary that leaves December open would add to the Loonie's losses.
Manufacturing shipments and wholesale sales for September are second-tier releases, as are Tuesday's U.S. inflation figures for this pair.
UK GDP Gives Sterling Buyers Their Next Test
Thursday's UK GDP figures are expected to show growth of 0.7% in the third quarter, up from 0.4% in the second, with the data due at 07:00. Citi and Nomura forecast 0.6%.
"This week's MPC speeches and Q3 GDP release, for which we expect 0.7% quarter-to-quarter growth with upside risk, matter for the decision," says Pantheon Macroeconomics.
Under the playbook, a print above consensus would support the pound and help GBP/CAD through 1.8900. A miss would keep the pair inside its range.
Barclays expects "only one more increase in Bank Rate, delivered in February 2027, bringing it to 4.25%."
Pound Sterling Live's Pound to Canadian Dollar forecast looks for buyers to keep pressing at 1.8900 this week, with a daily close above the line opening 1.90 and the 2026 high beyond it.
