Canadian Dollar to Pound Sterling Forecast: GBP Heads Towards Bottom of Recent Ranges
- Written by: Gary Howes
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The pound to Canadian dollar exchange rate is poised just below 2014 highs and resistance at 1.86 at the start of a new month. The attached image tells the story of this pair quite clearly; the currency remains trapped in a band that has come to define 2014 trade.
The GBP exchange rate complex has been on the front-foot for much of the week thanks to a bevy of strong data releases. However, on Friday we have seen the Construction PMI number come in below expectations, and this has tamed enthusiasm for the GBP somewhat which is now taking the rate towards the bottom of the range.
The exchange rate's improved performance suggests that a fresh rally towards resistance at 1.86 could once again be in play.
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On Thursday, the pound sterling to Canadian dollar exchange rate traded higher on a day-to-day basis having reached 1.8548 following the data releases.
We note the pair does look comfortable around these levels and a test of 1.86 could well transpire only if Tuesday's UK Service PMI data smashes expectations.
May's First Set of Data is Pro-GBP
Markit's Manufacturing PMI read at 57.3, well ahead of the 55.4 expected.
Net Lending to Individuals (MoM) (Mar) which came in at £2.9B, ahead of expectations for £2.3B.
Consumer Credit (Mar) read at £1.13B, ahead of forecasts for £0.600B. This is a massive increase. However, pound sterling gains will be tempered by news that Mortgage Approvals (Mar) came in below expectations at 67.135, expectations were for 71.050M.
"Today’s data is good news for the sustainability of the recovery providing some evidence that manufacturing will play a significant role as well as the services sector. In addition, growth in new orders seems set to continue to support employment and output growth in the following months," says Armela Mancellari at Barclays.
Why is the Canadian dollar lower?
There has been a bevy of economic data releases for traders to consider today.
In Canada Gross Domestic Product (MoM) (Feb) came in at 0.2%, in line with expectations,
However, markets could be expressing concern over poor industrial production figures. The March figure read at 0.4%, below consensus estimates for 0.5%.
The US dollar exchange rate complex is under-performing today after GDP numbers disappointed markets.
David White at Spreadex tells us:
"The bulls are facing a test of confidence this afternoon, as US Q1 GDP came in well below expectations. Output across the world’s largest economy by transactions printed a mere 0.1 percent expansion against forecasts of 1.2 percent.
"ADP by contrast beat consensus, showing 220k jobs added against a forecast of 203k. The market has so not reacted particularly badly, pointing to the main event later tonight: the Fed minutes.
"Since the equity market is hardly in freefall as a result of the number, investors might take solace from the crowd that the consequences of the event aren’t yet biting. But the session is far from over yet, and traders will likely be more vigilant of taking on risk today than most others, waiting to see how flows direct prices."
