Insights 
VT 
The GBP/CAD exchange rate fell to its lowest level since early August, continuing a nine-day streak of losses. The Bank of Canada (BoC) cut its interest rate by 25 basis points to 2.25% and signalled the end of further easing. This move pressured the British Pound as UK fiscal concerns and expectations of a Bank of England (BoE) rate cut continue to weigh on its value.
The Canadian Dollar remained strong, supported by stable oil prices, with West Texas Intermediate crude trading at $60.41 per barrel. The British Pound faced additional pressure amidst rising UK fiscal worries and increasing anticipation of a BoE interest rate cut. There is a 74% probability of a December rate cut, up from 44% earlier in October, based on market data.
Monetary Policy and Impact
The Bank of England’s monetary policy adjustments, including interest rate changes and quantitative easing, have a direct impact on the Pound’s value. Quantitative easing tends to weaken the Pound, while quantitative tightening supports it, with the BoE aiming for price stability and a steady inflation rate.
Based on market movements, the GBP/CAD currency pair is in a strong downturn, falling for nine straight days to its lowest point since August 2025. This is because the Bank of Canada (BoC) has signaled it is finished cutting interest rates, while the Bank of England (BoE) is expected to cut its own rates soon. The pair is now trading around 1.8381, well below the highs we saw earlier in October.
The Canadian Dollar remains firm after the BoC indicated its 2.25% interest rate is likely appropriate for the foreseeable future. This hawkish stance is backed by recent statistics showing Canadian core inflation held at 2.4% year-over-year in September 2025, giving the central bank little reason to ease further. Additionally, oil prices are providing support, with West Texas Intermediate crude trading steadily above $62 per barrel.
UK Economic Challenges
Meanwhile, the British Pound is facing pressure from several angles, including ongoing fiscal concerns and weak economic data. The latest figures showed UK inflation fell to 1.8% in September 2025, missing the BoE’s 2% target, while Q3 GDP growth was revised down to a mere 0.1%. This has cemented expectations that the BoE will need to cut rates to support the economy.
For us, this widening policy gap between the two central banks presents a clear trading signal in the coming weeks. The fundamental drivers strongly favor continued weakness in GBP/CAD. We should therefore position ourselves for further downside in this pair using derivative instruments.
The probability of a BoE rate cut at its next meeting on November 6 has now surged to over 85% according to overnight index swaps, up dramatically from just 44% at the beginning of October 2025. This market consensus means the path of least resistance for the Pound is lower against currencies like the Canadian Dollar. We should therefore consider strategies that profit from this expected move.
Given this high-conviction view, buying GBP/CAD put options is a sensible approach to capitalize on further declines while managing risk. The current market environment suggests targeting a move below the 1.8300 level in the weeks ahead. This strategy allows us to benefit from the anticipated fall in the exchange rate.
We have seen this pattern before, such as during the 2014-2016 period when diverging central bank policies created a sustained trend in the currency market. Just as then, the clear contrast between the BoC’s stable outlook and the BoE’s dovish turn suggests this downward trend in GBP/CAD could persist for some time.
