Title: GBP/CAD Weekly Forex Outlook: BoE Hints at Further Cuts, BoC Makes 25bps Rate Move
Original article by Tim Clayton, sourced from ExchangeRates.org.uk
As financial markets adjust to evolving central bank policies, the Pound Sterling to Canadian Dollar (GBP/CAD) currency pair has entered a period of increased volatility. The latest developments indicate diverging economic strategies by the Bank of England (BoE) and the Bank of Canada (BoC), both of which are navigating a complex global economic environment characterized by sticky inflation, weakening global demand, and cautious consumer spending. These dynamics are expected to significantly influence the direction of the GBP/CAD exchange rate over the coming weeks.
This article presents a detailed analysis of the GBP/CAD currency pairing in light of the recent policy decisions, economic data releases, and projected macroeconomic outlooks of the United Kingdom and Canada.
Current GBP/CAD Market Overview
– As of the week ending September 22, 2025, the GBP to CAD rate traded within a relatively narrow range amid mixed signals from both economies.
– GBP/CAD opened the week on a cautious note after the Bank of England’s Monetary Policy Committee (MPC) signaled a potential path for additional interest rate cuts in the near future.
– In contrast, the Bank of Canada (BoC) moved ahead with a 25 basis point rate cut, aligning its monetary stance with growing recessionary pressures within the Canadian economy.
Key Events Driving GBP/CAD Movement
1. BoE Signals Dovish Outlook
At its September meeting, the Bank of England voted to maintain the Bank Rate at 5.00 percent, halting a string of aggressive rate hikes that began in December 2021. However, BoE Governor Andrew Bailey and several MPC members hinted that peak rates may already be achieved, and room for future cuts is now on the table, depending on inflationary developments.
Key points from the BoE meeting:
– While inflation remains above the 2 percent target, core inflation and wage growth are showing signs of moderation.
– The UK economy continues to show signs of stagnation, with GDP growth forecast to remain near zero for much of 2025.
– The central bank emphasized a data-dependent approach, leaving the door open for potential cuts if inflation slows faster than expected.
2. Bank of Canada Cuts Policy Rate by 25 Basis Points
In a widely anticipated move, the Bank of Canada lowered its overnight lending rate by 25 basis points to 4.75 percent, citing subdued economic activity and softening labor market conditions. This marks the first rate cut by the BoC since initiating a tightening cycle that lasted through much of 2022 and 2023.
Details of the BoC’s decision:
– Canadian GDP contracted by 0.2 percent in Q2 2025, raising recessionary fears.
– Labor market data showed rising unemployment, with the national jobless rate reaching 6.2 percent, up from 5.5 percent earlier in the year.
– Inflation fell to 2.6 percent in August, close to the BoC’s 2 percent target, giving policymakers room to ease rates.
3. Market Reaction and Sterling Weakness
The shift in tone from the BoE weighed on the British Pound, which experienced moderate depreciation against both the US Dollar and other G10 currencies. Increased investor expectations of impending rate cuts fueled demand for higher-yielding assets elsewhere.
– GBP/CAD weakened slightly following the BoE’s dovish comments.
– The Canadian Dollar gained moderate strength following the BoC’s decision, although gains were somewhat tempered by overall concerns about the Canadian economy.
4. Bond Markets and Rate Expectations
Markets are now pricing in further rate cuts by both central banks heading into Q4 2025 and early 2026. Interest rate derivatives indicate:
– A 60 percent chance of a BoE cut by December 2025.
– A 75 percent probability of
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