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GBP/CAD spot at publication: 1.7481Bank transfer rate (indicative guide): 1.6869-1.6969Transfer specialist rates (indicative): 1.7080-1.7300More information on specialist rates available to you, hereCanadian lender and financial services provider CIBC have this month told clients they have turned more constructive on the Canadian Dollar in 2021, but they also note a vaccine dependent recovery in the UK will likely aid Sterling higher against its Canadian counterpart.

As a result the Pound-to-Canadian Dollar exchange rate is forecast to endure a steady glide path higher over the coming months.

The call comes as the Pound records a 0.64% against the Canadian Dollar already in 2021, but the Canadian unit has in turn recorded a 0.84% gain on the Euro and has returned to a small gain against the U.S. Dollar.

"CAD levels are stronger, less room for depreciation ahead vs. our prior call," says a monthly foreign exchange forecast briefing note from CIBC.

Appreciation by the Canadian Dollar against the Dollar and Euro thus far in 2021 is a result of a combination of rising oil prices and the 'less-dovish' assessment on the outlook delivered by the Bank of Canada in their January statement, according to CIBC economist Katherine Judge.

Market participants went into the January policy meeting expecting some form of easing to be announced by the BoC in order to further aid the economy and financial system given the ongoing covid-19 crisis.

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"Markets were mulling over the possibility that the BoC would undertake a micro-cut of 10-15 bps in January with an eye towards dampening enthusiasm for further C$ appreciation. Instead, as we expected, the Bank opted to keep rates on hold," says Judge.

CIBC reflect that the market is expecting the Bank of Canada to hike interest rates ahead of the U.S. Federal Reserve, a sequence of events that would typically be expected to aid Canadian Dollar strength. However, Judge says this is misplaced and the BoC will likely only follow the Fed.

The Canadian Dollar is meanwhile expected to outperform a broadly weaker U.S. Dollar, which is being tipped by CIBC to experience a weakening trend in 2021 on a continuation of foreign portfolio diversification away from the greenback.

CIBC analyst Jeremy Stretch meanwhile says the UK economy should experience a recovery into the second half of the year, although this would be dependent on the vaccination programme.

"Expect the latter to encourage GBP/USD to return to levels not seen since early 2018," says Stretch.

The Pound-to-Canadian Dollar exchange rate is forecast by CIBC to be at 1.76 by the end of March 2021, 1.81 by the end of June, 1.85 by the end of September and 1.86 by the end of the year.

The U.S. Dollar-to-Canadian Dollar exchange rate is meanwhile forecast to be at 1.30 by the end of March 2021, 1.32 by the end of June, 1.33 by the end of September and 1.33 by year-end.

The Euro-to-Canadian Dollar exchange rate is forecast at 1.60 by the end of March 2021, 1.60 by the end of June and 1.68 by the end of September and year-end.