- CAD tipped to outperform

- GBP/CAD seen in 1.70-1.72 range

- BoC to hike rates in third quarter of 2022

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GBP/CAD reference rates at publication:Spot: 1.7400Bank transfer rates (indicative guide): 1.6790-1.6913Money transfer specialist rates (indicative): 1.7240-1.7278More information on securing specialist rates, hereSet up an exchange rate alert, hereEconomists at one of the largest lenders and financial services provider in North America have updated their forecasts for the Canadian Dollar, finding that the currency will gain over the Dollar but will likely be locked around the 1.70-1.72 range against the Pound for the foreseeable future.

Wells Fargo says it is "positive on the Canadian dollar's prospects over the medium term" in a monthly global economic and financial forecast research update.

Economists at the bank tell clients they do however also see some potential for the Canadian currency to rebound more strongly than their base-case forecast.

"Canadian economic growth slowed in Q2, given the renewed spread of COVID cases, while globally concerns surrounding the Delta variant have risen. However, with Canada's economy now rebounding and should global COVID concerns ease, we expect the Bank of Canada to continue on a steady path to less accommodative monetary policy," says Nick Bennenbroek, International Economist at Wells Fargo Securities, LLC.

Underlying drivers of Canadian Dollar value are identified as remaining supportive, particularly oil prices which remain elevated when compared to the past 12 months.

Also supporting the currency's outlook are Canadian government bond yields which are above their U.S. equivalents.

"Both factors should be supportive of the Canadian dollar," says Bennenbroek.

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The global picture will also determine the outlook, given the Canadian currency tends to appreciate against the Dollar during times of global economic expansion and buoyant investor sentiment.

Recent nerves over the spread of the Covid-19 Delta variant have however unsettled confidence to some degree, which has aided the U.S. Dollar and put a lid on the Canadian Dollar's appreciation potential.

"Should unsettled market conditions pass relatively quickly, we would expect faster Canadian dollar appreciation and, in this more favorable scenario, the USD/CAD exchange rate could move close to CAD1.1500 over the medium term," says Bennenbroek.

Wells Fargo meanwhile anticipate the Bank of Canada (BoC) will pursue a monetary policy stance that is consistent with higher Canadian bond yields and the Canadian Dollar.

They expect a further slowing in the weekly pace of bond purchases to just C$1BN per week to be announced at the October monetary policy meeting as part of its effort to close its quantiative easing programme.

The BoC in July further slowed their bond purchases to a weekly pace of C$2BN.

"Our view remains that the Bank of Canada will deliver an initial rate hike in Q3-2022," says Bennenbroek.

The U.S. Dollar-to-Canadian Dollar exchange rate is forecast by Wells Fargo to end 2021 at 1.24, be at 1.22 by the end of March 2022, 1.21 by the end of June 2022 and 1.20 by the end of September 2022.

The Pound-Dollar forecast at Wells Fargo is set at 1.38, 1.39, 1.41 and 1.43 for the above time frames.

This gives a Pound-to-Canadian Dollar exchange rate forecast of 1.71, 1.70, 1.7060 and 1.7160.

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