Can the British Pound finally break out of the 1.840's against the Canadian dollar? (GBP vs CAD)
- Written by: Gary Howes
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The Pound Sterling vs Canadian dollar exchange rate (GBP-CAD) continues to struggle with the area just north of 1.84.
A look at the below image illustrates just how difficult this area is:
Comments regarding the strength of the CAD have so far failed to trigger much weakening in the currency, which in turn suggests the currency has fallen enough for the time being.
The Canadian dollar was in favour in the last session, however the pound has pared back some losses during early trading.
A look at the Canadian dollar exchange rate complex today shows:
"Sterling will attempt to drive the rate back over 1.85, but considering demand for the loonie, it will be difficult for trading to return to these levels, let alone sustain them. For now however, sterling strength has returned and we expect trading around the 1.8480 mark," says Sasha Nugent at Caxton FX.
Outlook for the Canadian dollar remains poor
Medium-term downside CAD risks still dominate says analyst Stephen Gallo at BMO Capital.
Gallo does however warn that the appetite to aggressively add to USD/CAD shorts above 1.095-1.100 should remain limited for now.
The inability of the US dollar to push higher will certainly make life difficult for those hoping for the British pound to Canadian dollar exchange rate to head higher.
January CPI suggests some pass-through from the weaker CAD is already in play, and expectations for BoC rate cuts during the remainder of the year are basically nil again, according to the OIS curve.
"This is probably because weather has played a very big role in recent Canadian data weakness. More time will be needed to determine which portion of the weakness is due to the weather, and which is not," says Gallo.
Additionally, BMO cite Canadian equities have outperformed their US counterparts so far this year, and the oil price still says the CAD is moderately undervalued.
"We currently look for very good resistance in USDCAD at 1.113-1.115 to persist through the GDP data on Friday," says Gallo.
