Home Currency News GBP to CAD The Pound tested lower against the Canadian Dollar during last week’s session

The Pound tested lower against the Canadian Dollar during last week’s session

Posted by on February 20th, 2012. Connect with us on .

Pound to Canadian Exchange Rate Forecast - The Pound tested lower against the Canadian Dollar during last week’s sessionWith the exception of a brief break of 1.5900 and a couple of downside breaks, one of which culminated in a 5-month low of 1.5545.

Foreign Currency Market Update – GBP / CAD Update

The Pound tested lower against the Canadian Dollar during last week’s session, trading down to 1.5591 on Wednesday. Significantly, the downward move failed to breach the 5-month low of 1.5545 which it last sank to on 17th January. Sterling ended the week with a flourish to touch 1.5793 just before Friday’s close.

Last Week

Last Friday was a significant day for Canadian data releases, with January’s CPI Inflation figure providing a highlight. The headline inflation number printed above expectations at 2.5%, suggesting that the Bank of Canada may have to adopt a conservative approach to future monetary policy decisions. On the debit side, Thursday’s Canadian Manufacturing Shipments data for December showed a monthly increase of only 0.6% against expectations of a positive 2.0% print. Meanwhile, in the UK, data releases were depressingly soft until Friday’s better than anticipated UK Retail Sales numbers, which convincingly beat expectations to show at an annualised 1.9%. Up to that point, UK CPI Inflation numbers, which pointed to a significant cooling in the rate of British price rises, along with worse than expected domestic labour market numbers, had held back the Pound.

Heads Up

*Denotes the importance of the data item *** being the highest level.
** Tuesday morning sees the release of January’s UK Public Sector Borrowing figures – they are expected to show that the British government managed to pay off £6.3bn of its debt last month – a lower number than this could hurt Sterling.

*** Wednesday morning’s release by the Bank of England of the minutes of its February MPC meeting will be closely-monitored by analysts for clues on the future direction of British monetary policy.

*** Friday morning sees the release of the official Q4 GDP figures for the UK economy – a quarterly contraction of 0.2% is expected. Anything worse than this could spark a Sterling sell-off.

** Canadian Retail Sales numbers for December are published on Tuesday, with a slight drop from November’s monthly increase of 0.3% expected.

Outlook

With the exception of a brief break of 1.5900 and a couple of downside breaks, one of which culminated in a 5-month low of 1.5545, the Pound has been trading in a sideways pattern against the Canadian Dollar since the turn of the year. The pair is in need of a fundamental push to send it back towards the band of resistance in the mid-1.6300s which it tested three times in Summer/Autumn 2011. Alternatively, Sterling-negative news could see the pair make a renewed run at 1.5300 which has provided support on four separate occasions since the start of last year. With a dearth of potentially market-moving data releases penned in for this week, such a move is unlikely to materialise for a little while at least. With the Bank of England likely to keep base rate on hold at 0.50% for the foreseeable future, the fundamental push required to launch GBP CAD towards its recent support/resistance levels could be provided if/when the Bank of Canada gives any indication that it is considering an alteration in domestic interest rates. The last change came last September – the next Bank of Canada policy announcement comes on 8th March.

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