Trading GBP/CAD
The GBP/CAD is one of the key forex cross pairs. The pound sterling is the world’s 5th top reserve currency, while the Canadian dollar is 7th on the list. It is a popular FX asset with decent bid-ask spreads, high volatility and ample liquidity. This tutorial will break down GBP/CAD investing strategies, ideal trading windows, price history and benefits of the forex pair.
GBP/CAD Trading Brokers
- Forex.com - Forex.com is a leading FX broker. The brand offers a wide range of currency pairs and some of the lowest fees in the industry. Spreads on the EUR/USD come in as low as 0.0 with a $7 commission per $100k.
- Interactive Brokers - Trade 85 major, minor and exotic forex pairs via CFDs on IB's FXTrader platform with tight spreads and low commissions, or trade forex on the spot market. They offer more FX assets than almost any competitor.
- NinjaTrader - NinjaTrader supports the trading of popular currencies including the EUR/USD. The trading software also offers unique features tailored to forex trading, including specific order and market windows.
- OANDA US - OANDA offers 68 forex pairs, more than many alternatives. The broker's in-house platform also offers impressive execution speeds and a suite of advanced charting and analysis tools.
- Webull - Webull offers a modest collection of 17 currencies, including majors like EUR/USD. Forex can be traded on the feature-rich investing app with real-time quotes and low spreads.
Top 3 Broker Comparison
| Forex.com | Interactive Brokers | NinjaTrader | |
|---|---|---|---|
| Forex Assets | 80+ | 70+ | 50+ |
| EUR/USD Spread | 1.0 | Commission (.20 pts x trade value) | 1.3 |
| Forex App Rating | |||
| Minimum Deposit | $100 | $0 | $50 |
| Regulator | NFA, CFTC | SEC, FCA, IIROC, SFC | NFA, CFTC |
| Visit | Visit | Visit | Visit |
#1 - Forex.com
Forex.com is a leading FX broker. The brand offers a wide range of currency pairs and some of the lowest fees in the industry. Spreads on the EUR/USD come in as low as 0.0 with a $7 commission per $100k.
"Forex.com is an excellent broker for forex traders with over 80 currency pairs, tight spreads, low commissions and powerful platforms. The brand is also heavily regulated while its parent company is listed on the NASDAQ, giving it a high trust score."
- DayTrading Review Team
- GBPUSD Spread: 1.0
- EURUSD Spread: 1.0
- EURGBP Spread: 1.0
- Total Assets: 80+
- Leverage: 1:50
- Platforms: MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral
About Forex.com
Forex.com boasts a global reputation with multiple awards and 20+ years experience. Regulated in the US, EU, UK and Canada they provide a huge range of markets, not just forex, and offer competitive fees on a cutting-edge platform. The brand also provides a suite of additional tools, from performance analytics and SMART Signals to advanced charts and strategy builders.
Pros
- Excellent trading tools including Trading Central, SMART Signals and MetaTrader 4
- Up to 15% cashback rebates for active traders
- Low minimum deposit of $100
Cons
- $15 monthly inactivity fee
- Investment offering varies between countries
- No copy trading platform
#2 - Interactive Brokers
Trade 85 major, minor and exotic forex pairs via CFDs on IB's FXTrader platform with tight spreads and low commissions, or trade forex on the spot market. They offer more FX assets than almost any competitor.
"Serious traders seeking a regulated broker with unparalleled access to stock markets should look at IB. Their range of stocks can't be beaten."
- DayTrading Review Team
- GBPUSD Spread: Commission (.20 pts x trade value)
- EURUSD Spread: Commission (.20 pts x trade value)
- EURGBP Spread: Commission (.20 pts x trade value)
- Total Assets: 70+
- Leverage: 1:50
- Platforms: AlgoTrader, OmniTrader, eSignal, TradingCentral
About Interactive Brokers
Interactive Brokers is a leading global brokerage that provides access to a comprehensive offering of stocks as well as forex, futures, metals, bonds and cryptos. The firm has over 40 years experience in the online trading industry and is heavily regulated by SEC, FCA, IIROC, and SFC. Traders use the proprietary Trader Workstation and can access powerful tools and data feeds as well as comprehensive educational resources.
Pros
- Commission reimbursement with Toggle AI
- Regulated by some of the world's most reputable bodies including in US
- You have a reliable real-time market data feed, that rarely goes offline
Cons
- The TWS platform falls short in terms of technical charting
- Accessing products like CFDs is not straightforward compared to competitors
- Mediocre customer support
#3 - NinjaTrader
NinjaTrader supports the trading of popular currencies including the EUR/USD. The trading software also offers unique features tailored to forex trading, including specific order and market windows.
"We recommend NinjaTrader for high-volume futures traders looking for low fees and premium analysis tools."
- DayTrading Review Team
- GBPUSD Spread: 1.6
- EURUSD Spread: 1.3
- EURGBP Spread: 1.6
- Total Assets: 50+
- Leverage: 1:50
- Platforms: eSignal
About NinjaTrader
NinjaTrader is a US-headquartered and regulated brokerage that specializes in futures trading. There are three pricing plans to suit different needs and budgets, as well as ultra-low margins on popular contracts. The brand's award-winning charting software and trading platform also offers a high-degree of customization and superb technical analysis features.
Pros
- Easy account opening that takes a few minutes
- Widely respected and heavily authorized by the NFA and CFTC
- Excellent trading software for active users with bespoke widgets and indicators
Cons
- Non forex and futures trading requires signing up with partner brokers
- Withdrawal fee on some funding methods
- Premium platform tools come with an extra charge
#4 - OANDA US
OANDA offers 68 forex pairs, more than many alternatives. The broker's in-house platform also offers impressive execution speeds and a suite of advanced charting and analysis tools.
"OANDA is a top-rate broker for US traders seeking a user-friendly platform with premium market research and a straightforward joining process. OANDA is a particularly good pick if you want a heavily regulated broker with a secure trading environment."
- DayTrading Review Team
- GBPUSD Spread: 3.4
- EURUSD Spread: 1.6
- EURGBP Spread: 1.7
- Total Assets: 65+
- Leverage: 1:50
- Platforms: MT4, TradingView, AutoChartist
About OANDA US
OANDA is a popular brand offering exceptional execution, low deposit requirements and advanced charting and trading platform features. The top-rated brand has over 25 years of experience and is regulated by trusted agencies, including the NFA/CFTC. Around the clock support is available, alongside flexible contract sizes and automated trade executions.
Pros
- Reliable, trustworthy and secure brand with authorization from tier-one regulators
- Low minimum deposit for beginners
- US clients accepted
Cons
- Customer support not available on the weekend
#5 - Webull
Webull offers a modest collection of 17 currencies, including majors like EUR/USD. Forex can be traded on the feature-rich investing app with real-time quotes and low spreads.
"Webull is best for traders looking to buy and sell stocks on a user-friendly platform with zero commissions. The intuitive app also makes this broker great for mobile investors."
- DayTrading Review Team
- GBPUSD Spread: 0.4
- EURUSD Spread: 0.2
- EURGBP Spread: 0.4
- Total Assets: 15+
- Leverage: 1:4
- Platforms: Desktop App, Web Terminal
About Webull
Webull is a US-regulated trading app that offers stocks, options, forex, cryptos, ETFs, fractional shares and more. The firm is authorized by the SEC and FINRA with a strong trust rating. Low fees, no minimum investment and generous welcome bonuses have made the discount broker popular with online investors.
Pros
- Zero commissions or inactivity fees
- No minimum deposit for beginners
- Brokerage account plus IRA
Cons
- High deposit and withdrawal wire fees for non-US residents
- No MetaTrader 4 access
- Sometimes sudden changes in trading conditions
Live Chart
Pros Of Trading GBP/CAD
- Volatility – This currency pair displays high levels of volatility, with wide spreads in slow periods and narrow spreads during busy periods. This allows for plenty of opportunities to make trades and profit from price fluctuations when spreads are tightest.
- Relative predictability – Historically, the GBP/CAD has a tendency to display notable trends in the long term, especially with the CAD being a commodity currency. So, research and analysis can be straightforward, making it a good choice for medium to long-term gains.
- High-interest rates – As the pair contains the GBP, it has some of the higher interest rates among key currencies. Thus, this FX pair provides enough liquidity and trading volume to make it a popular investment choice.
- Resources – Conducting technical analysis is easier to make with the number of tools available. Live candlestick charts help you access real-time price movement, historical graphs show you FX rates from yesterday or last week, and pivot points can help you analyze trends over time. Plenty of websites can give you access to investing forums with trader sentiment ratings and market outlook. All of these are useful when creating predictions for today or in the long term.
Risks Of Trading GBP/CAD
- Volatility – while the GBP/CAD volatility can result in quick wins, swift movements can also lead to losses. To counter this, traders must employ effective risk and money management strategies.
- Low relative liquidity – Being a minor currency pair, it has lower liquidity compared to other pairs like the GBP/USD. This can make it more expensive to trade.
- Report heavy – Much of the movement in exchange rates depends on important economic news, not only from the respective countries of the GBP/CAD pair but from neighboring countries like the US and Europe. Therefore, the choice to buy and sell is not as straightforward as you may think. For example, the Ukraine-Russia war in Europe has impacted the GBP and indirectly weakened the GBP/USD.
- Automated competition – You may be equipped with competitive bid-ask spreads or the provision of yearly forward rates. However, most traders face a serious challenge in a market dominated by a number of intelligent investment algorithms today. These bots are entering and exiting positions when predetermined criteria have been met.
Influences On Movement
There are many factors to consider when investing in the GBP/CAD, which shape market sentiment and average prices. The most significant influences are:
- Neighboring countries – It is essential to consider the economies of closely related countries. For example, Canada and the US are major trade partners. If America experiences growth, Canada will likely follow suit. Thus, the US dollar will likely affect GBP/CAD performance. On the other hand, decisions from Europe during Brexit were vital in determining GBP/CAD’s future. In fact, the pair is a proxy for the dynamics that happen to the EUR/USD.
- Monetary policies – The Bank of England makes important decisions that govern GBP’s interest rates. Likewise, major decisions from the Bank of Canada to raise or lower interest rates today affect the future performance of the CAD. A good example is the Covid-19 pandemic when the regions with solid monetary policies were seen as safer investments, while those that failed to control the virus lost ground in the forex market. So, keeping on top of economic announcements will help you gain a competitive edge.
- Commodity prices – As the Canadian dollar is a commodity currency, it is heavily influenced by commodity prices such as oil. They represent a large share of exports in Canada. So, the GBP/CAD price drops when oil prices go up and vice versa. As purchasing power increases, this movement will be reflected in a higher exchange rate.
Currency Correlations
Unlike major pairs, the GBP/CAD does not have the US dollar as a component, making it a cross, i.e., GBP/JPY. Cross-currency pairs often move differently to majors. However, to some extent, they are still dependent on the USD movement.
For example, the GBP/CAD can move in relation to GBP/USD and USD/CAD pairs. Pairs can move with each other but also in the opposite direction, which affects the correlation coefficient:
- Positive correlation – This occurs when pairs move in the same direction as each other. For example, popular pairs, GBP/USD, AUD/USD, and EUR/USD, are all positively correlated. This is an outcome of the US dollar being the counter currency. Thus, any changes to the strength of the US dollar will affect these pairs.
- Negative correlation – This occurs when currency pairs react in opposite directions. Popular pairs include USD/CHF, USD/JPY, and USD/CAD. You will notice that the US dollar is the base currency.
Application
A GBP/CAD trader can use this information to better understand the consequences of movement in certain pairs. Specifically, keeping an eye out for proxy pair EUR/USD can be used to your advantage. However, it is important to note that correlations do not always remain stable. This is because economic factors and market speculation can result in shifts in currency correlations.
GBP/CAD Trading Strategy
No matter the strategy you opt for, whether you utilize pivot points, support and resistance levels, 5-year averages, or live charts to create weekly projections, the following can make the difference in your strategy:
Timing
Successful GBP/CAD day trading depends on timing. You typically want to invest during the highest levels of volume and volatility to generate profits above the cost of spreads and commission. Thus, it’s important to trade during the ideal window.
Just because the forex market is open 24/5 does not mean every one of those hours is worth trading. So, when is the ideal time to trade? Significant movement in GBP/CAD usually occurs when the European trade session opens. This is between 08:00 to 17:00 GMT.
However, the majority of UK monthly economic data news comes out between 07:00 to 09:30 GMT, and US economic releases come out at 13:30 to 15:00 GMT. This is when the pair usually experiences higher volumes. Particularly, 30 to 60 minutes before releases and 1 to 3 hours after are good times to trade as news flow can impact the pair’s value.
Buying & Selling GBP/CAD
There are a number of strategies you can utilize when investing in GBP/CAD.
Scalping strategies involve attempting to make profits by buying or selling an FX pair and holding it for an ultra-short period. Since the GBP/CAD pair has good volatility, it makes scalping possible. A scalper capitalizes on small price movements that occur throughout the day. Then they rely on compounding their gains by making a large number of small trades.
You can opt for a swing trading strategy that focuses on capturing short to medium gains and cutting losses quicker in the market. Trading positions typically last anywhere between days to weeks, with the idea to consistently gain short-term profits that accumulate over time. Generally, swing traders go long at levels of support and short sell at levels of resistance.
You can also use trends to inform your strategies. A trend can move upwards, downward, or sideways. As mentioned, GBP/CAD benefits from relative predictability, so identifying historical trends to your advantage can prove profitable when deciding market entry and exit points. Generally, GBP/CAD trends tend to form in the medium to long term, which you can decipher on live charts. Trend traders normally go long when the pair’s current price moves downward, past the moving average, and then go short when the price goes above the moving average.
News
Some prefer to use the latest market news and outlook for their GBP/CAD investing strategies. This is because GBP and CAD prices can experience shifts in response to major news releases. In fact, some forex news resources offer the latest analysis, forecasts, premarket sentiments, and real-time GBP to CAD conversions. The following are some popular sources to utilize:
- TradingView gives you access to the latest GBP/CAD price changes, charting tools, forecasts, and market news
- IG is a leading forex trading platform with excellent tools and spot rates alongside 5 year, 10 year, and 20-year charts
- X-rates provides live exchange rates, a free currency conversion calculator, and a monthly exchange rate average
- XE provides real-time daily exchange rates of how many CAD converts to the pound, which is useful when getting optimum travel money rates and quotes
- Banks like HSBC and Mastercard provide live FX rates
History Of GBP/CAD
It is also useful to understand the origins of the currencies and any significant historical data before investing in the GBP/CAD.
Early GBP/CAD
The pound sterling was created in 775 AD when silver pennies were the dominant currency during the Anglo-Saxon period. Having been around for 1200 years, the GBP is thought to be the oldest currency still in circulation today. The Bank of England was the first central bank in history, born out of the Battle of Beachy Head in 1694 and 1944. The Bretton Woods conference shifted the world from the pound sterling to the US dollar.
In the early 1840s, Canada adopted the Canada pound but transitioned to a decimalized dollar in the 1850s. Nicknamed the ‘loonie’, the CAD was attached to the USD until 1970. This was after the fall of the CAD after 1960, but inflation meant that it had returned to a free-floating currency, and it remains so today. The Canadian dollar is controlled by the country’s central bank, the Bank of Canada.
Recent GBP/CAD
Over recent years, historical exchange rates of GBP/CAD have been affected by key events. After the UK’s referendum vote to leave the EU in 2016, the pound sterling saw its lowest levels since 1985. Brexit caused the GBP to fall more than 10% overnight, hitting $1.3236. The impact of the vote still has some lasting impacts until this day, with the decline affected by concerns over a successful Brexit deal. For example, in October 2019, the GBP to CAD exchange rate was struggling to move back to the higher levels it saw in the previous month. At the time, its rates were sitting at 1.639, while the Brexit deadline was expected to happen at the end of that month.
The CAD dollar saw a sharp rise in 2007, hitting parity with the US dollar for the first time since 1976. However, in recent years, dramatic fluctuations in the value of the Canadian dollar have primarily correlated with the shift in oil prices, which reflects its status as a commodity currency. For example, in 2016, the price of oil dropped to $30 per barrel. Against the US dollar, CAD hit a low of 1.46. A similar scenario happened in 2020 during the Covid-19 pandemic when oil dipped to sub-zero. This sent the CAD to 1.44.
While the CAD value is mainly dependent on the US market and oil prices for success, the pound is much more impacted by political and economic risks. During Brexit, the GBP was weakened. This can clearly be seen on charts, especially paired with USD, which at the time was much stronger than the pound.
In 2022, another major economic risk that affects the GBP is the inflation rate caused by the higher oil prices and a need for rebalancing after the Covid-19 relief policies. At the same time, because the United Kingdom is impacted by Europe, the effect of the Ukrainian-Russian war can also be seen in charts, with GBP/CAD dropping to 1.58 in May 2022.
Role Of GBP
Before you start investing your capital into the GBP/CAD pair, it helps to gain context on the role these two currencies play. With this knowledge, you will be in a stronger position to make predictions about the market.
While the UK is smaller in size geographically, its economy is the fifth-largest in the world. In fact, London is home to nearly 43% of daily forex exchange transactions. The country’s economy is service-oriented, followed by manufacturing and agriculture sectors. Its banking and financial activities are also becoming the greatest contributors to the national GDP.
The UK’s monetary and fiscal policies have been shown to outperform most other EU countries. The British pound is, in fact, the world’s fifth most widely held reserve currency. It is also one of the few currencies worth more than the US dollar. GBP accounts for around 13% of daily forex trading volume in the forex market, with commonly traded pairs being GBP/USD and EUR/GBP.
While the pound has a long history of global economic leadership, major political events, such as Brexit could undermine the position of the pound. This is what long-term investors will have to take into account. On the other hand, this volatility can provide short-term traders with investment opportunities.
Role Of CAD
It is also important to understand the role the CAD plays.
Canada is ranked tenth in the world in terms of GDP and has had relatively strong growth over the last 20 years, with brief periods of recessions in the early 1990s and 2009. While manufacturing is the country’s cornerstone, Canada’s economy relies heavily on commodities as it is a producer of petroleum, minerals, woods, and grains. Thus, trade flows from those exports can influence investor sentiment. As mentioned, investors must also consider the events happening in the US due to the tight trading relationship with Canada.
Major economic data from Canada includes the release of GDP, retail sales, industrial production, inflation, and trade balances. Monetary policy is controlled by the Bank of Canada. As a country with relative economic health, it has had high-interest rates against other developed economies. And while it is not a top reserve currency like the GBP, it is considered a global safe haven.
Final Word On Trading GBP/CAD
The GBP/CAD pair promises volatility, relative predictability, and high-interest rates, which attract traders from around the world. It is important to utilize tools like technical analysis, real-time exchange rates, historical chart graphs, signals, and trends. On top of that, it is important to maintain risk management strategies and to conduct quality trading during the ideal investing window. Investing with a trusted OTC broker such as Oanda can also prove fruitful.
FAQs
When Is The Best Time To Trade GBP/CAD?
During the European session, the ideal window to trade this pair is 08:00 – 17:00 GMT. This is when the pair is most liquid and volatile.
What Are The Highest And Lowest Rates Of GBP/CAD?
In recent years, GBP/CAD saw rates as high as 2.04 in July 2015. However, they have not reached that peak since and have seen rates as low as 1.58 in August 2019.
How Much Is 1 GBP To CAD?
The GBP to CAD exchange rate is always shifting. See a live chart for the latest rate between these currencies.
Is GBP Stronger Than The CAD?
Historically, the value of the GBP has been stronger than the CAD. The British economy’s GDP ranks higher than CAD, and it ranks above the Canadian dollar as one of the world’s reserve currency. However, many factors are constantly affecting the value of both currencies, such as political events and the price of oil. Thus, it is important to keep up with the latest news on the pair.
Should I Trade With GBP/CAD?
When day trading the pair effectively, profits can be decent. There are plenty of investment strategies you can opt for, like swing trading, trend trading, or scalping. If you trade in the ideal window, keep up with the news, utilize resources like charts, and practice strategies, investing in the GBP/CAD can be prosperous.