• GBP/CAD supported by 50-day average at 1.6332
• Softening CAD offering GBP scope to edge higher
• BoC decision, February jobs data in focus for CAD
• As GBP hears BoE commentary & eyes GDP data 

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The Pound to Canadian Dollar exchange rate has arrested a multi-month correction lower and could be likely to remain well supported by its 50-day moving average at 1.6332 through what is an important week ahead for the Canadian Dollar outlook. 

Canada's Dollar softened slightly against most major counterparts in Monday trade, entrenching itself into one of the bottom spots among majors for the recent week along the way while leaving GBP/CAD nestled within what remains a neutral position for the technical trend on the charts. 

"The recent consolidation range continues to hold while trend (DMI) oscillators have slipped into neutral on the daily and weekly studies," says Shaun Osborne, chief FX strategist at Scotiabank, of the current Canadian Dollar charts. 

"Shorter-term price signals do lean a little more positively for the pound. Spot needs to break through channel resistance in the mid-1.64s or push below firm support around 1.61 to generate more directional momentum from here," was the latest conclusion. 

While recent trade has been consistent with a still-neutral outlook from the charts, Sterling has nonetheless spent more time toward the top of this range than it has the bottom in a market that is potentially suggestive of which way the balance of directional risk points.  

Above: Pound to Canadian Dollar rate shown at hourly intervals alongside USD/CAD. Click image for closer inspection. To optimise the timing of international payments you could consider setting a free FX rate alert here.

Canada's Dollar has softened throughout the opening week of March and since Statistics Canada said last Tuesday that economic output had fallen -0.1% in December to round off an austere quarter that was not out of line with Bank of Canada (BoC) expectations for the period. 

"Ben Reitzes is anticipating a low-key BoC. There is a currency angle of moderate importance for this BoC policy announcement, which is that USDCAD was trading south of 1.34 at the time of the January MPR. Since then, CAD has fallen back to unchanged YtD. The Governing Council has wiggle room to alter the January characterization of the CAD as 'stable' if it wishes," says Stephen Gallo, a global FX strategist at BMO Capital Markets.

"I don't see this as extremely likely, but it probably carries a higher risk than the BoC turning notably dovish. The shock risk for the GBP this week seems to be tilted up, if January GDP and trade figures are solid. US data releases overtake the UK's in importance, but sterling has the potential to be a near-term RV outperformer if we have to think about the UK economy expanding in 2023 — and another 50bps from the BoE in March (we expect 25bps)," Gallo adds. 

Trivia;

The Sveriges Riksbank of Sweden is widely accepted as being the oldest central bank of them all and the Bank of England has not begged to differ but Poland's Narodowy Bank Polski argues differently. 

"The oldest issuing (central) bank is deemed to be the Bank of England (1694), which has existed continuously to the present day. The only older European bank was the issuing bank of Sweden (1668), which went bankrupt after a short period of activity," the footnote on page 4 in An Outline History of Polish Central Banking says. 

Softer GDP growth in line with recent forecasts is the economic data backdrop against which Wednesday's interest rate decision will be made, although few, if any expect fireworks from the BoC this time around, given February's announcement of a "conditional pause" in the Canadian interest rate cycle.

The BoC said last month that it would likely hold the cash rate at 4.5% as it observes the local economy for clues about the extent to which inflation is being brought under control by the recent 425 basis point increase.

"Additionally, risks to households incomes (notably from considerable mortgage reset risks for this year) supports the need for a period of inertia on the monetary policy front," writes Bipan Rai, North American head of FX strategy at CIBC Capital Markets, in a Monday market commentary. 

Above: Financial model-derived estimates of probable trading ranges for selected currency pairs this week. Source Pound Sterling Live. (If you are looking to protect or boost your international payment budget you could consider securing today's rate for use in the future, or set an order for your ideal rate when it is achieved, more information can be found here.)

"Current USD/CAD valuation is slightly above where it should be, but not egregiously so. On the crosses, the picture is a bit more mixed as the CAD is overvalued against the EUR and GBP, but undervalued against the MXN," Rai and colleagues say. 

Wednesday's BoC decision is the highlight of the week for the Canadian Dollar but will be followed on Friday by the Statistics Canada publication of employment figures for February, which will scrutinised closely by the market for signs of softening in labour demand and wage growth for workers. 

Meanwhile, over in the UK, Sterling's attention is likely to be on Bank of England (BoE) Monetary Policy Committee member Swati Dhingra on Wednesday ahead of Friday's publication of GDP data for the month of January. 

"Following consecutive rises in GDP in October and November, output dropped in December, falling 0.5% m/m. The decline was driven largely by lower output in the health, education, entertainment and transport sectors, partly reflecting the impact of industrial action in those areas," says Andrew Goodwin, chief UK economist at Oxford Economics, who forecasts a 0.3% increase for Friday. 

"Strikes probably also held growth back in January. And that month's PMIs were in contractionary territory. But January did see a rebound in retail sales and there were signs in some surveys of an improvement in the mood-music surrounding the economy's prospects," Goodwin writes in a research briefing. 

Above: Pound to Canadian Dollar rate shown at daily intervals with selected moving averages. Click image for closer inspection. To optimise the timing of international payments you could consider setting a free FX rate alert here.