by Jon Beddell
Foreign Currency Market Update – Sterling / Canadian Dollar
Sterling is rapidly deteriorating toward last year’s lows at 1.6250. The currency failed to take any lasting reassurance from Wednesday’s release of the minutes of the last Bank of England meeting, which showed that all nine committee members voted to halt the quantitative easing program.
The pound took a new bashing this morning after data showed that the UK government borrowed a further £4.3 billion in January, a month where tax receipts usually result in a surplus. Analysts were expecting a net influx of cash into government coffers, but a 7.7% fall in tax revenues combined with a 9.7% increase in public spending meant the January account fell into the red for the first time in 17 years. The figures surprised the market, sending sterling lower across the board.
The only relief has been against the embattled euro, which has taken sterling’s top spot as the world’s pariah currency; for now at least!
The technical outlook is negative. A test of 1.6250 looks like a foregone conclusion. If we make new lows below there it could signal the start of a new down leg. We are also testing record lows against the Aussie dollar today. Anyone with CAD requirements should consider covering at least half now, and also contemplate using a stop order to protect the balance against further weakness.
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