Canadian Dollar vs British pound exchange rate: GBP/CAD tipped to remain around 1.85

The Canadian Dollar (CAD) experience weakness on Friday after Canadian retail sales came in much weaker than expected, however that was offset by the firmer CPI numbers.

"The weakness in retail sales was mainly due to bad weather and will likely be a temporary factor; while the pickup in inflation should have somewhat eased rate cut expectations," says a comment on the matter issued by Lloyds Bank Research.

A look at the Canadian Dollar exchange rate complex on Monday morning shows:

BoC Governor Poloz has claimed that the strength of the Canadian dollar is still a challenge for manufacturers, which in turn implies the CAD is still too strong.

The higher than expected January inflation reading should reassure the central bank about below target inflation and CAD strength.

"GBP/CAD has advanced further this morning, despite the more positive inflation reading. We expect trading to remain around 1.85," says Sasha Nugent at Caxton FX.

2y relative USD-CAD rates spreads moved in favour of CAD post numbers however USD/CAD failed to follow the move.

The firmer CPI prints does come ahead of concerns about base effects expected in the February CPI numbers.

"Nevertheless we view the recent up move in USD/CAD as overdone and in the near-term favour a move back below 1.10 in line with relative rate spreads," say Lloyds.

British pound sent lower on Friday

Last week’s GBP-negative news brought the Cable to close below 1.6668 (former high) vs the US dollar on Friday.

"As trend and momentum indicators lose pace, we expect deeper downside correction in the continuation of lower-lows-lower-highs pattern building since last Monday fresh pick of 1.6823. Option barriers are seen pre-1.6675/1.6700," says a note on the matter from Swissquote Bank.

Looking at the euro dollar rate, EUR/USD rallied to 1.3759 on Friday as the existing home sales in US dropped at the faster pace of -5.1% in January (vs. -4.1% exp.).

The pair opened the week well bid as Moody’s upgraded Spain’s government bond rating to Baa2 with positive outlook roughly 5 minutes to NY close on Friday. EURUSD rallied to 1.3750 as Europe walked in.

Asian markets were week on Monday, this weighing on the commodity currency complex.

The Hang Seng and Shanghai’s Composite lost 0.88% and 1.75% respectively (at the time of writing) on MNI report that China’s Industrial Bank pulled back on lending to property developers.

News weighed on the Aussie-complex already weakened by last week’s decline in iron ore prices.