Pound to Canadian Dollar Rate Hits 3-Week Best as US Tariffs Dominate

February 27, 2025 - Written by Tim Boyer

STORY LINK Pound to Canadian Dollar Rate Hits 3-Week Best as US Tariffs Dominate

Geopolitical developments and trade rhetoric will remain key influences in the outlook for the Canadian Dollar and US Dollar in the short term.

US tariffs will be very important in the short term with 25% tariffs on imports from Mexico and Canada due to come in on March 4th.

The Pound to Dollar exchange rate (GBP/USD) has been held below 2-month highs near 1.2700 to trade around 1.2650.

Although the pair has been held in relatively narrow ranges, volatility remains a key threat.

According to Rabobank, “Right now, what political leaders say, especially when they meet, matters far more for markets than a run-of-the-mill number.”

ING commented; “we still like a lower GBP/USD and doubt it holds onto gains in the high 1.26 area.”

The Pound to Canadian dollar (GBP/CAD) exchange rate has strengthened to 3-week highs around 1.8135.

The pair is likely to jump if tariffs go into effect while a deal or further delay would trigger a slide.

As far as the international agenda is concerned, there are reports that the US and Ukraine have reached an agreement on a minerals deal, but there have been no details on any security details.

The US is also pursuing an important domestic economic agenda with a major shake-up in the federal government, tighter controls on immigration and an extension of tax cuts which will have important short and medium-term economic implications.

On Tuesday, the US reported that consumer confidence dipped to an 8-month low of 98.3 for February from 104.3 previously.

MUFG commented; “Taken more broadly, this data point fits in with increasing signals that policy uncertainty is having a meaningful impact on consumer and business sentiment, and is likely to have a real economic impact down the line on investment and growth.”

Tapas Strickland, head of market economics at National Australia Bank. added; "U.S. data flow on net is now disappointing expectations, calling into question the U.S. exceptionalism narrative that had been USD supportive."

Markets are now pricing in over a 65% that the Federal Reserve will cut interest rates by June.

A weaker US economy would tend to undermine the dollar, but the global economy will also be a key focus.

MUFG added; “From an FX perspective, what matters is not just absolutes but also relatives.”

Domestically, the CBI retail sales index was little changed at -23 for February from -24 in January and close to consensus forecasts with retailers expecting a faster rate of decline in March.

CBI Principal Economist Martin Sartorius commented; “February marked another month of falling annual sales in the retail sector. This trend of poor business conditions extended across the broader distribution sector, with wholesalers and motor traders also reporting a drop in sales.

He added; “Looking ahead, retailers expect a sharper sales downturn in March, partly due to the later timing of Easter compared to last year.”

According to ING; “We think sterling can start to underperform through March, but we have to be patient.”

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TAGS: Pound Canadian Dollar Forecasts