The Pound to Canadian Dollar (GBP/CAD) exchange rate traded lower on Wednesday after softer-than-expected UK inflation weighed on Sterling, while rising oil prices provided support for the commodity-linked Canadian Dollar.
At the time of writing, GBP/CAD was trading around CA$1.8845, down roughly 0.2% on the day.
DAILY RECAP:
The Pound (GBP) came under pressure on Wednesday after the UK’s latest consumer price index showed inflation cooled more rapidly than expected in June.
According to the Office for National Statistics (ONS), headline inflation slowed from 2.8% to 2.6%, below forecasts for a more modest decline to 2.7% and the weakest reading since March 2025.
The larger-than-expected slowdown in price growth weighed on Sterling by encouraging expectations that the more dovish members of the Bank of England (BoE) may push back against further policy tightening later this year.
However, losses in the Pound remained limited as core inflation proved more resilient than expected, while analysts also noted that renewed hostilities in the Gulf are already feeding through to higher energy prices, potentially limiting the decline in inflation.
Meanwhile, the Canadian Dollar (CAD) edged higher as rising oil prices underpinned the commodity-linked currency.
Brent crude climbed around 3% to US$94 a barrel, reaching its highest level since the signing of the US-Iran memorandum of understanding in early June.
However, the Canadian Dollar’s upside remained capped as US President Donald Trump’s threat to impose a 50% tariff on Canadian goods continued to weigh on sentiment.
Near-Term GBP/CAD Forecast: Burnham Policy Funding Questions to Weigh on Sterling?
Looking ahead, a quiet UK economic calendar may shift the focus back to political developments and how UK bond markets react to Andy Burnham’s first week as Prime Minister.
This could leave the Pound to Canadian Dollar exchange rate under pressure if investors remain concerned about how Burnham’s initial policy announcements will be funded.
Meanwhile, movement in the ‘Loonie’ is likely to remain closely tied to oil prices, with any further gains in crude expected to provide additional support for the Canadian Dollar.
