GBP/CAD Rate: Upside Momentum Forecast to Remain Strong

GBP/CAD has risen strongly after a slump in commodity markets weighed on the Canadian Dollar and an easing in Brexit fears buoyed the Pound.

The pair has climbed to new highs of 1.7680 and is expected to continue rising in the absence of any bearish signs.

The exchange rate formed a double bottom on the weekly chart which has a conservative target at 1.8000 calculated by extrapolating the height of the pattern higher.

Momentum remains strong and reflective of price growth and we see a strong possibility the pair will rise to meet the 1.8000 target.

On the daily chart witness the 50 and 200-day moving averages about to cross, in what is called a special ‘Golden Cross’ which is an extra bullish signal.

Data Ahead for the Canadian Dollar

The main release for the Canadian Dollar this week will be employment data on Friday at 13.30 GMT.

The consensus estimate is that the Unemployment rate will stay at 6.7% and payrolls will rise by 10k.

On Thursday, May 4 the Governor of the Bank of Canada, Stephen Poloz, is giving a speech which could impact on the currency.

He is expected to strike a cautious tone on trade, given the protectionist stance adopted by the US and their decision to place a tariff on Canadian softwood lumber.

Any hints that the BoC might cut interest rates as a result would certainly deal a negative blow to CAD.

Data for the Pound

A new month means fresh data in the form of the trio of UK Purchasing Manager Surveys (PMI) for Manufacturing, Services and Construction.

These are the most timely economic data releases available and will give us a view of how the UK economy performed in April.

Both Manufacturing, on Tuesday at 9.30 BST, and Construction, out on Wednesday at the same time, are forecast to fall by two basis points to 54.0 and 52.0 respectively.

Services, out on Thursday at 9.30, is expected to fall more steeply to 54.5 from 55.0 previously.

The recent downturn in UK economic activity means markets will be watching whether the trend continues with PMIs.

“Markets are looking for a bit of a pull-back in the PMI’s, and we’re just modestly more optimistic on balance,” said TD Securities in a review of the week ahead.

We doubt that disappointment will feed into any sustained pressure on Sterling though as the currency appears to be more concerned with global investor dynamics and domestic politics at present.