Pound Close to Eight-Year Best vs Canadian Dollar as Carney New PM

March 10, 2025 - Written by Tim Boyer

STORY LINK Pound Close to Eight-Year Best vs Canadian Dollar as Carney New PM

Newly-elected Canadian Prime Minister Carney has pledged to take the fight to US President Trump over trade tariffs.

The Bank of Canada will face a tough decision this week and trade stresses will inevitably trigger further currency volatility.

The Pound to Canadian dollar (GBP/CAD) exchange rate is trading close to 1.8585 and just below 8-year highs around 1.8615 recorded last week.

Overnight, former Bank of Canada and Bank of England Governor Carney secured a very convincing win in the Liberal Party leadership vote with over 85% of the vote.

He will be only the second Canadian Prime Minister without a parliamentary seat.

There is no confirmation of when Carney will take over from Trudeau and there is also a high degree of uncertainty over the timing of a general election which must be held by October 20th.

Trade policy will be a key component in the short term following the US imposition of 25% tariffs on Canadian imports into the US.

Trump subsequently announced exceptions on close to 50% of trade under USMCA, although Canada has continued to impose retaliatory action on imports from the US.

Carney has pledged that he will win the trade war with Canada.

According to Carney; “We didn’t ask for this fight. But Canadians are always ready when someone else drops the gloves. So the Americans, they should make no mistake, in trade as in hockey, Canada will win.”

On US President Trump Carney added; "We can't let him succeed," and added that Canadian retaliatory tariffs would remain in place "until the Americans show us respect".

The trade war will have implications for monetary policy.

The Bank of Canada will announce its latest interest rate decision on Wednesday with expectations of a further 25 basis-point cut to 2.75%.

A cut this week would be the seventh successive move from 5.0% in June 2024.

According to CIBC; “The Bank’s job is to keep an eye further out on the horizon than a month or two. It can’t reopen a shuttered factory with a few rate cuts, but it can support domestic demand as an offset.”

MUFG commented; “Heightened downside risks to growth from trade disruption will offset recent positive Canadian data releases revealing economic growth was stronger than expected last year.”

The bank added; “We expect the BoC to put more weight on the disinflationary impact from weaker growth rather than the inflationary impact from retaliatory tariffs. In these circumstances, we expect the CAD to continue to underperform in the near-term.”

Carney has promised strong support for the UK in tackling the new world order, but the relationship could cause friction between the UK government and US Administration.

Latest Canadian Dollar Exchange Rates Today

Canadian Dollar to Pound exchange rate (CAD/GBP) is 0.53735 (-0.12%)
Canadian Dollar to Euro exchange rate (CAD/EUR) is 0.63937 (-0.19%)
Canadian Dollar to Dollar exchange rate (CAD/USD) is 0.69268 (-0.44%)

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