Market Update – GBP CAD
Sterling has continued its slide since last week’s update. Mervyn King’s comments expounding the benefits of a weak pound continue to weigh on the market, giving traders little comfort in holding the pound. In other news, commentators are speculating that the Bank of England could introduce negative interest rates on bank deposits held at the central bank. By penalising the banks for holding large cash reserves the BoE would hope to stimulate bank lending and improve the pace of economic recovery. The downside for sterling however, is that such a move would likely prompt a fall in interbank interest rates (as there would no longer be an interest rate advantage to holding cash), making sterling even less attractive. The Swedish Riksbank has already done exactly that, pushing market interest rates down to just 0.25%.
The Canadian dollar has rallied through the 1.7450 support level mentioned in recent reports. That adds a negative slant to the technical outlook and gives the impression that sterling will likely head for the January lows around 1.6750. Clients with CAD requirements should consider covering now to avoid further downside.
Any opinions expressed in this document are those of TorFX
analysts. Any analysis and/or forecasts provided are aimed at
helping clients understand market conditions and developing trends.
Clients are wholly responsible for their own trading
decisions.
Related posts:
- King’s comments drive the Sterling/Canadian dollar rate back
- Euro Update – Sterling started last week badly by breaking below the key 1.15 support
- The Pound finds further support as UK unemployment falls to the lowest level since 1975
- Sterling faring badly against the Canadian dollar
- Cable drops through the major support level at 1.8600 for the first since August as the UK trade deficit narrows by less than expected
