Trading GBP/CAD

The pound sterling is the world’s 5th top reserve currency, while the Canadian dollar is seventh on the list. The GBP/CAD is considered a minor currency pairing and one of the major cross pairs. With decent bid-ask spreads, high volatility and liquidity, it’s a popular FX asset. This page will break down GBP/CAD investing strategies, ideal trading windows, history and benefits of trading with the forex pair.

GBP/CAD Trading Brokers

Forex.com are a leading forex broker. Offering the largest range of currency pairs (80+) and some of the tightest spreads in the industry.
NinjaTrader offer Traders Futures and Forex trading. Use Auto-trade algorithmic strategies and configure your own trading platform, and trade at the lowest costs.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
The leading US trading Exchange. Nadex offer genuine exchange trading to US clients on Binary Options. Fully regulated by the CFTC.
Trade on a handful of the most traded currency pairs with leverage.
Use digital options to take straightforward buy and sell positions on a range of currencies.
Trade with leverage on the FX market.
Trade on FX pairs with 1:500 leverage.
Just2Trade offer hitech trading on stocks and options with some of the lowest prices in the industry
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
One of the largest discount brokers in the US, with a fixed trading commission and access to a large array of trading products and securities
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Why Day Trade 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.
  • Diverse trading vehicles – As a liquid and volatile pair, day traders can generate more profits from a number of trading vehicles i.e. ETFs, futures and options. For example, the GBP/CAD is more volatile than its GBP/USD counterpart.
  • High-interest rates – As the pair contains the GBP, it has some of the higher interest rates among major 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 help you analyse trends over time. There are plenty of websites that 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 – Whilst the GBP/CAD volatility can result in quick wins, swift movements can also result in losses. To counter this, traders must employ effective risk and money management strategies.
  • Low relative liquidity – Being a minor currency pair it has relatively 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 neighbouring countries like the US and Europe. Therefore, the choice to buy and sell is not as straightforward as you may think.
  • Automated competition – You may be equipped with competitive bid-ask spreads or the prevision of yearly forward rates. However, most traders face a serious challenge in a market dominated by a number of intelligent trading algorithms today. These bots are already entering and exiting positions when predetermined criteria have been met.

Influences On Movement

There are many factors to consider when trading the GBP/CAD, which shape market sentiment and average prices. The most significant influences are:

  • Neighbouring 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 pair.
  • Monetary policies – The Bank of England make 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. 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. Commodities 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, which makes it a cross i.e. GBP/JPY. Cross currency pairs often move differently to majors. However, they are still to some extent dependent on its 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 its 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’ll 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 on 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 Day Trading Strategy

Whatever trading strategy you opt for, whether you utilise 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 trade 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 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 utilise when trading GBP/CAD.

Scalping strategies involve attempting to make profits by buying or selling an FX pair and holding it for a short time. Since the GBP/CAD pair has good volatility, it makes scalping possible. A scalper capitalises 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. Generally, trend traders 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 to inform GBP/CAD trading 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 utilise:

  • X-rates provides live exchange rates, a free currency conversion calculator and a monthly exchange rate average
  • 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
  • XE provides real-time daily exchange rates of how many CAD convert to the pound, which are useful when getting optimum travel money rates and quotes
  • Banks like HSBC and Mastercard provide live FX rates

History Of GBP/CAD

It’s useful to understand the origins of the currencies and their 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 in 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 decimalised dollar in the 1850s. Nicknamed the ‘loonie’, the CAD dollar was attached to the USD up until 1970. This was after the fall of the CAD dollar after 1960, but inflation meant that it had returned to a free-floating currency and it remains so until 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 recent events. After the UK’s referendum vote to leave the EU in 2016, the pound sterling saw its lowest levels since 1985. Brexit had 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 whilst 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 had dropped to $30 per barrel and against the US dollar, it hit a low of 1.46 CAD.

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.

Role Of GBP

Before you start investing your trading capital into the GBP/CAD pair, it helps to gain context on the role these two currencies play. With this knowledge, you’ll have a stronger position to make predictions about the market.

While the UK is smaller in size geographically, its economy is the sixth largest in the world. In fact, London is home to nearly 30% 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 national GDP. The monetary policy of the British pound is set and managed by the Bank of England.

GBP/CAD FX investing

The UK’s monetary and fiscal policies have shown to outperform most other EU countries. The British pound is in fact the world’s fifth most widely held reserve currency. The pound is also one of the few currencies that is worth more than the US dollar. In the forex market, GBP accounts for around 13% of daily forex trading volume, 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, the volatility this brings can provide short-term traders with trading opportunities.

Role Of CAD

It’s 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’s 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.

Investing in the GBP/CAD FX exchange rate

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. While it’s 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, predictability and high-interest rates, which attracts traders from around the world. Whether you’re trading with 1 to 1 million GBP to CAD, it is important to utilise tools like technical analysis, real-time exchange rates, historical chart graphs, signals and trends.

On top of that, it’s important to maintain risk management strategies and to conduct quality trading during the ideal investing window. Trading with a trusted OTC broker such as Oanda can also prove fruitful.

FAQ

When is the best time to trade GBP/CAD?

The ideal window to trade this pair is 08:00 – 17:00 GMT, during the European session. 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 2.002 in Feb 2016. However, rates have not reached that peak since and have seen rates as low as 1.5869 in Jan 2017.

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 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, the profits can be decent. There are plenty of trading strategies you can opt for like swing trading, trend trading or scalping strategies. If you trade in the ideal window, keep up with the news, utilise resources like charts, and practice strategies, investing in the GBP/CAD can be prosperous.