As this week’s session gets underway, it remains unclear whether the pause in the erstwhile upward move for GBP CAD marks a conclusion to the move higher.
Foreign Currency Market Update – GBP / CAD Update
Movement in the GBP CAD market was plagued by indecision during last week’s session, causing the pair to trade within a relatively tight range. The weekly high of 1.6189 came at the very start of the Sunday’s opening session and the rate had dipped to 1.6029 by Tuesday, before recovering slightly to end the week back in the 1.61s once more.
GBP CAD had been on a pronounced uptrend from its mid-March low until the 11th of May, when it broke to its yearly high of 1.6206. Last week’s sideways trading was a continuation of the previous week’s price action, with the Pound being weighed down by a series of negative data releases. Last Tuesday’s annualised CPI inflation figure came in below analysts’ expectations to show at 3.0%. This was a particularly negative print for the Pound, as the majority of commentators feel that a slowing in the rate of UK price rises gives the Bank of England monetary policy committee scope to increase the £325bn currently allocated to the Bank’s quantitative easing programme – a move which would hurt the Pound. Wednesday’s Retail Sales numbers for April added to the pain for Sterling, registering at -0.3%, way below analysts’ expectations. Things got worse for the Pound on Thursday morning when the latest revision to the UK GDP growth figures for the first quarter of this year revealed that Britain’s double-dip recession is deeper than had previously been feared.
As this week’s session gets underway, it remains unclear whether the pause in the erstwhile upward move for GBP CAD marks a conclusion to the move higher. In order to state this with any level of conviction, consecutive closes below the 1.6000 level would be required. Conversely, given the potential for bad news regarding the eurozone’s debt crisis over the next month, the sideways trading of the past two weeks may prove to be a temporary flat patch before the pair heads higher. If a hard default by Greece begins to look a certainty, then fears may grow for the global economic recovery, hitting the Canadian Dollar hard. This could send GBP CAD upwards towards last October’s 18-month high at 1.6391.
Summary of major upcoming data releases that we think may move the market.
- Last week saw indecision grip the GBP ZAR market
- The Canadian Dollar has started this week’s session firmly under the cosh
- The Pound tested lower against the Canadian Dollar during last week’s session
- The Canadian Dollar was strongly supported against the Pound during the early part of last week’s trading session
- The Canadian Dollar weakened against the Pound during the first half of last week’s trading session