• GBP/CAD momentum fades in favour of consolidation
• Scope for rough 1.6814 to 1.7075 range in short-term
• U.S. Dollar trend, Fed decision & CA job data in focus 

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The Pound to Canadian Dollar exchange rate has fully reversed its 2022 losses with a breakout above important technical resistance on the charts but with momentum now dissipating it could be most likely to consolidate within a rough 1.6814 to 1.7075 range over the coming days.

Canada's Dollar was far from being underperformer last week but it lagged behind many European counterparts enough to help lift GBP/CAD above 1.6848 and a notable Fibonacci resistance level on the charts that had previously stalled the rally in Sterling through much of March and April.

GBP/CAD reached highs of 1.7068 ahead of the weekend and was aided in the endeavor after revisions to earlier numbers and declining activity in a minority of industries led Canadian economic growth to underwhelm expectations once February data was published by Statistics Canada on Friday. 

"This poor hand-off to the second quarter is consistent with our view that GDP will stall in the three months to June (the Bank of Canada expects an annualized rate of 1.0%)," says Matthieu Arseneau, an economist at NBF Financial Markets.

Above: Pound to Canadian Dollar rate shown at daily intervals with Fibonacci retracements of February rally and selected moving averages indicating possible areas of technical support for Sterling. Click image for closer inspection. 

Statistics Canada's preliminary estimate suggests growth was a healthy 0.6% in the opening quarter but that the economy shrank by 0.1% in March, potentially setting up a soft second quarter that would be consistent with the outlook illustrated in last month's Bank of Canada (BoC) monetary policy report.

The BoC estimated in April that economic growth would likely come in at 1.3% in 2023 following a stronger-than-previously expected start to the year while inflation was expected to fall to 3.5% before ebbing further toward the 2% target over the course of 2024 and 2025. 

For as long as the economic data remains consistent with this outlook, financial markets might remain of the view that the next move in local interest rates is likely to be lower, in turn placing a cap on Canadian Dollar while helping to support GBP/CAD along the way. 

"GBP gains are doing some serious damage to long-term trend resistance point on the monthly chart but we’ll wait for month-end to assess those implications," says Shaun Osborne, chief FX strategist at Scotiabank.

Above: Quantitative model estimates of ranges for selected 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.)

"With trend momentum signals aligned bullishly across the intraday, daily and weekly DMIs, GBP gains should be able to extend towards the 1.70 area. A retest of the 1.74 zone at least looks likely, however. Support is 1.6785/95," Osborne writes in a review of the Canadian Dollar charts last Tuesday. 

With little in terms of major appointments for Sterling in the economic calendar, price action in GBP/CAD this week is likely to be influenced most by the trajectory of the Canadian Dollar and other North American currencies following Wednesday's Federal Reserve (Fed) policy decision.

Wednesday's Fed decision would potentially come as a headwind for GBP/CAD if it leads the U.S. Dollar to strengthen as the two have been negatively correlated in recent years, although there is a potentially underappreciated risk of it taking a rain cheque on a widely expected interest rate rise this week.

To the extent that it does, and the U.S. Dollar weakens as a result, GBP/CAD could be likely to remain well-supported above roughly the 1.68 handle going into Friday's releases of employment reports in the U.S. and Canada. 

Above: Pound to Canadian Dollar rate shown at weekly intervals with Fibonacci retracements of 2022 decline indicating possible areas of technical resistance for Sterling while selected moving averages denote possible support. Click the image for closer inspection. 

North American employment figures could pose risk to GBP/CAD, however, if job markets remain tight and wages growth strong because this would suggest financial markets are being too optimistic in hoping for interest rate cuts to be announced in the U.S. and Canada toward year-end.

"The February real GDP data contained a lot of information that should be considered supportive to the Bank of Canada’s prolonged pause on interest rates," says Randall Bartlett, a director of Canadian economics at Desjardins.

"A combination of slowing growth, decelerating inflation and financial instability should help to keep the Bank on the sidelines until the turn of the year," Bartlett writes in a Friday review of Canada's February GDP data. 

Meanwhile, the Canadian Dollar and GBP/CAD are likely to pay close attention to a fireside chat between BoC Governor Tiff Macklem and guests at the Toronto Region Board of Trade on Tuesday at 18:05 London time.