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:
- US Dollar Update – avoid the risk of continued downside
- Euro Update – Sterling declined another 2 cents since last week’s special update
- Canadian dollar further boosted by rebound in commodity prices
- Euro Update – Sterling started last week badly by breaking below the key 1.15 support
- King’s comments drive the Sterling/Canadian dollar rate back
