**GBP to CAD Forecast: British Pound Rises as Canadian Dollar Weakens Following PMI Disappointments**
*Based on an article originally by James McCabe, ExchangeRates.org.uk*
The British Pound (GBP) posted gains against the Canadian Dollar (CAD) in response to disappointing Canadian PMI data, as economic sentiment around the CAD took a hit after the release of fresh data highlighting slowdown in Canada’s business activity. At the same time, the Pound was buoyed by stronger economic fundamentals and broad market confidence in the UK’s economic resilience.
As of October 1, 2025, GBP/CAD rose to near 1.7300 level, a notable advance from the 1.7200 handle registered earlier in the week. Bullish sentiment towards the Pound gained traction following robust UK economic figures, while the Canadian Dollar struggled in the wake of a weaker-than-forecast Purchasing Managers’ Index (PMI) report from S&P Global.
Let’s take a deeper look into the recent economic indicators, market drivers, and what both technical and fundamental analyses suggest for the GBP/CAD currency pair moving forward.
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## Recent Performance and Impactful Data Releases
### British Pound (GBP) Strength Supported by Stable UK Economy
The Pound has recently found support from a stable economic outlook in the UK. While inflation remains above the Bank of England’s (BoE) 2 percent target, month-on-month data trends suggest that the worst may be over in terms of price pressure. Additionally, relatively resilient consumer spending and an uptick in business activity have encouraged traders to revise up their expectations for UK interest rates remaining higher for longer.
Key developments for the UK:
– **UK GDP Growth**: The UK economy grew at an annualized rate of 0.6% in Q2 2025 compared to the previous year. Recent indicators show modest yet consistent expansion, bolstering market confidence.
– **Inflation Trends**: CPI inflation has eased from 6.3% in early 2025 to 4.8% as of August 2025. Core inflation, which strips out volatile items like food and energy, also declined, suggesting the Bank of England’s rate hikes are having the desired cooling effect.
– **Housing Market**: Nationwide’s latest housing report shows house prices have stabilized, contributing to improved consumer sentiment.
– **BoE Interest Rate Policy**: The Bank of England, while pausing its series of rate hikes in its most recent meeting, has been vocal about maintaining a tight monetary stance for longer to ensure inflation remains on a downward trajectory.
The net result: investors see the UK economic environment as increasingly stable, generating demand for GBP across a number of currency pairs including GBP/CAD.
### Canadian Dollar (CAD) Pressured by Weak PMI Results and Sluggish Growth
The latest S&P Global Manufacturing PMI for Canada delivered a negative surprise to markets. The index fell to 47.8 for September 2025, down from 48.5 in August. Any reading below 50 signals contraction in the manufacturing sector.
Highlights of the Canadian situation include:
– **Weak Manufacturing PMI**: A figure of 47.8 marks the third straight month of contraction, raising concerns of a deeper slowdown in Canada’s industrial output.
– **Cooling Inflation**: Consumer inflation has also declined in Canada, with headline CPI easing to 3.1% in August. Importantly, core inflation has also dropped sharply, prompting speculation that the Bank of Canada may shift towards rate cuts earlier than anticipated.
– **Interest Rate Outlook**: Unlike the BoE, the Bank of Canada faces growing pressure to cut rates should growth continue to falter. Market pricing now includes a probability of an interest rate cut as early as Q1 2026.
– **Energy Prices and Oil Dependency**: As an oil-dependent economy, declining crude oil prices have negatively affected CAD. Brent crude pulled back from its 2025 highs near $92 per barrel, falling
Read more on USD/CAD trading.