Title: GBP/CAD Exchange Rate Forecast: Sterling Strengthens as Canadian Dollar Weakens Following PMI Data Miss
Author: Adapted from original article by Tim Clayton at ExchangeRates.org.uk
Date: October 1, 2025
The British pound (GBP) recorded solid gains against the Canadian dollar (CAD) on October 1, 2025, as weaker-than-expected Canadian economic data — particularly disappointing Purchasing Managers’ Index (PMI) results — negatively impacted investor sentiment toward the CAD. This divergence, paired with growing expectations about differing monetary policy paths between the UK and Canada, has created favorable momentum for the pound to Canadian dollar (GBP/CAD) exchange rate.
The GBP/CAD rate rose above 1.6550, with some analysts predicting additional upside potential amid contrasting economic performance and interest rate expectations on both sides of the Atlantic.
Below is an in-depth breakdown of the pound’s recent strength against the Canadian dollar, including detailed analysis of PMI data, central bank expectations, global growth forecasts, and geopolitical risk factors that could influence future currency movements.
Market Overview (as of October 1, 2025)
– GBP/CAD exchange rate: Rose by 0.5% during early London trading hours on October 1
– Current trading rate: 1.6567 (up from previous level around 1.6485)
– Key technical resistance: 1.6600, with technical support near 1.6400
– Recent 7-day performance: GBP up approximately 1.2% vs CAD
Key Drivers Behind GBP Strength Against the CAD
1. Canadian Economic Weakness Confirmed by Disappointing PMI Data
One of the major drags on the Canadian dollar this week was the below-expectation release of Canada’s S&P Global Manufacturing PMI for September 2025:
– Canadian S&P Global Manufacturing PMI: 47.3 in September, vs expected 49.5
– August PMI: 48.2
Interpretation of the data:
– A reading below 50 marks contraction in the manufacturing sector.
– The September figure of 47.3 signals accelerated deterioration in factory activity across Canada.
– It is the fourth consecutive month the Canadian Manufacturing PMI has remained below 50, reinforcing trends of reduced output, shrinking orders, and weakening demand.
– Key PMI subcomponents also signaled weakness:
– New orders declined at a faster pace
– Employment levels fell
– Supplier delivery times improved (often a sign of reduced demand pressure)
– Input cost inflation ticked higher
Weaker PMI data typically reduces investor confidence in a currency, especially when paired with related economic indicators showing sluggish performance. For Canada, the manufacturing sector’s persistent underperformance increases concerns about overall slowdown risks heading into Q4 2025.
2. Oil Prices: Volatility Weighs on the Canadian Dollar
As a commodity-linked currency, the Canadian dollar is heavily influenced by energy prices, particularly crude oil. Canada is one of the world’s leading oil exporters, and fluctuations in oil prices tend to correlate with movements in the CAD.
Recent trends in the oil markets affecting CAD performance:
– Brent crude: Fell 1.7% to $88.40 per barrel
– West Texas Intermediate (WTI): Down by 1.9% to $85.10 per barrel
– Demand-side fears: Markets are pricing in slower global growth, particularly from China and Europe, which has driven recent oil demand estimates lower
– Supply concerns: Easing fears of supply disruption from the Middle East and expectation of stronger output from non-OPEC nations
Lower oil prices undermine Canada’s export revenues and overall terms of trade, which can put downward pressure on the domestic currency. In contrast, the UK economy is less sensitive to oil prices, and this commodity divergence has favored the pound over the loonie.
3. Bank of Canada (BoC) vs Bank of England (BoE) Monetary Policy Divergence
Read more on USD/CAD trading.