According to Jinshi, Morgan Stanley said it recommends going long on GBP/CAD due to expected policy divergence between the Bank of Canada and the Bank of England. The bank expects the Bank of Canada to cut interest rates more aggressively than the Bank of England. This divergence supports the bullish view on GBP/CAD. The potential of the Canadian dollar to become a funding currency further supports the appeal of GBP/CAD longs, especially if UK inflation remains sticky, limiting the room for the Bank of England to cut interest rates.
