• GBP/USD fluctuates near 1.2650 after posting moderate gains on Monday.
• Strong resistance seems to have formed at 1.2670.
• The pair’s losses could remain limited unless market mood sours.

GBP/USD closed the first trading day of the week marginally higher but struggled to gather recovery momentum on Tuesday. As trading action turns subdued ahead of Wednesday’s key inflation data from the US, the pair could have a difficult time making a decisive move in either direction.

After opening in negative territory, major equity indexes in the US recovered to end the day virtually unchanged on Monday. In turn, the US Dollar (USD) weakened slightly against its major rivals. Additionally, the Federal Reserve Bank of New York reported in its latest Survey of Consumer Expectations that the year-ahead inflation expectation remained unchanged at 3% March, not allowing the USD to gain traction.

The US economic docket will feature NFIB Business Optimism Index for March and RealClearMarkets/TIPP Economic Optimism Index for April. These data are unlikely to trigger a noticeable market reaction. Investors could remain reluctant to take large positions before the US Bureau of Labor Statistics publishes the Consumer Price Index (CPI) data for March on Wednesday.

Meanwhile, US stock index futures trade mixed in the European session. Unless there is a bearish opening in Wall Street and a selloff in stocks, GBP/USD could hold its ground.

GBP/USD Technical Analysis

The 100-day, 50-day and the 20-day Simple Moving Averages (SMA) converge and form strong resistance at 1.2670 for GBP/USD. In case the pair clears that hurdle, technical buyers could take action and open the door to an extended uptrend toward 1.2710 (Fibonacci 50% retracement of the latest downtrend) and 1.2750 (Fibonacci 61.8% retracement).

On the downside, interim support is located at 1.2620 (Fibonacci 23.6% retracement) ahead of 1.2590 (200-day SMA).

• GBP/USD fluctuates near 1.2650 after posting moderate gains on Monday.
• Strong resistance seems to have formed at 1.2670.
• The pair’s losses could remain limited unless market mood sours.

GBP/USD closed the first trading day of the week marginally higher but struggled to gather recovery momentum on Tuesday. As trading action turns subdued ahead of Wednesday’s key inflation data from the US, the pair could have a difficult time making a decisive move in either direction.

After opening in negative territory, major equity indexes in the US recovered to end the day virtually unchanged on Monday. In turn, the US Dollar (USD) weakened slightly against its major rivals. Additionally, the Federal Reserve Bank of New York reported in its latest Survey of Consumer Expectations that the year-ahead inflation expectation remained unchanged at 3% March, not allowing the USD to gain traction.

The US economic docket will feature NFIB Business Optimism Index for March and RealClearMarkets/TIPP Economic Optimism Index for April. These data are unlikely to trigger a noticeable market reaction. Investors could remain reluctant to take large positions before the US Bureau of Labor Statistics publishes the Consumer Price Index (CPI) data for March on Wednesday.

Meanwhile, US stock index futures trade mixed in the European session. Unless there is a bearish opening in Wall Street and a selloff in stocks, GBP/USD could hold its ground.

GBP/USD Technical Analysis

The 100-day, 50-day and the 20-day Simple Moving Averages (SMA) converge and form strong resistance at 1.2670 for GBP/USD. In case the pair clears that hurdle, technical buyers could take action and open the door to an extended uptrend toward 1.2710 (Fibonacci 50% retracement of the latest downtrend) and 1.2750 (Fibonacci 61.8% retracement).

On the downside, interim support is located at 1.2620 (Fibonacci 23.6% retracement) ahead of 1.2590 (200-day SMA).

• Australia’s business conditions barely changed in March.

• Investors have scaled back Fed rate-cut expectations since the March employment report.

• Economists expect a decline in US inflation in March.

The AUD/USD outlook looks up as the Aussie stands its ground following the latest data unveiling steady Australian business conditions in March. Meanwhile, the dollar was weak despite rising Treasury yields as investors cautiously awaited the US inflation report. 

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Australia’s business conditions barely changed in March as higher interest rates pressured the economy. Moreover, sales and employment held steady. However, companies remained concerned about the economic outlook as the Reserve Bank of Australia is not looking to cut rates soon. At the moment, markets are expecting the first cut around November.

Meanwhile, in the US, investors have scaled back rate-cut expectations since the March employment report revealed a still-hot labor market. Demand in the economy is still high. Therefore, any interest rate cuts by the Fed have to be timed well to avoid a spike in inflation. 

Consequently, there is doubt in the market whether the Fed will start cutting interest rates in June. Moreover, markets now only expect 60 basis points of rate cuts in 2024.

The next major economic event in the US is the release of consumer inflation data. Economists expect a decline in inflation in March. However, these figures might also surprise to the upside. In such a case, rate-cut bets would decline further. Furthermore, investors would expect the first cut in July.  

AUD/USD key events today

There are no key events from Australia or the US today. As a result, investors will keep speculating ahead of the US inflation report.

AUD/USD technical outlook: Bulls aim for a higher high to confirm recent breakout

On the technical side, the AUD/USD price is bullish as it trades above a recently broken trendline. The trend recently reversed to bullish when the price broke above a resistance trendline. Moreover, it pulled back to retest the trendline and is now climbing. 

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Bulls must make a higher high above the 0.6620 critical resistance level to complete confirmation of the breakout. There is a high chance this will happen because the bullish bias is strong. The price sits far above the 30-SMA, and the RSI is in bullish territory above 50. Therefore, bulls might soon retest the 0.6660 key level.

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• Data revealed that Canada’s economy unexpectedly shed 2,200 jobs in March.

• The US added an impressive 303K jobs in March.

• Fundamentals support further upside for the USD/CAD pair.

The USD/CAD forecast points northward as the Canadian dollar weakens while the dollar holds on to gains after Friday’s employment figures. Traders are scaling back expectations for a Fed cut in June while simultaneously increasing bets for a BoC cut in June.

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On Friday, data revealed that Canada’s economy unexpectedly shed 2,200 jobs in March. Meanwhile, the unemployment rate soared to a bigger-than-expected 6.1% during the same period. This report revealed weakness in the labor market and the economy. Consequently, there is more pressure on the Bank of Canada to cut interest rates. Before the report, there was a 68% likelihood that the BoC would cut rates in June. However, after the report, this figure rose to 75%.

On the other hand, the US dollar strengthened on Friday after another blockbuster jobs report. Unlike Canada, the US added an impressive 303K jobs in March. Additionally, the unemployment rate fell to 3.8, indicating robust labor market conditions. As a result, investors scaled back bets that the Fed would cut interest rates in June. 

The rate cut outlook between the Fed and the Bank of Canada has diverged with these latest employment figures. The US economy remains robust, allowing the Fed to hold high rates for longer. Meanwhile, Canada’s economy is weak, and this could prompt the BoC to start cutting rates in June. These fundamentals support further upside for the USD/CAD pair. 

USD/CAD key events today

There are no major events today that might cause a lot of volatility. Therefore, the USD/CAD pair might consolidate.

USD/CAD technical forecast: Bullish momentum stalls at channel resistance

On the technical side, the USD/CAD price is trading in a bullish channel and recently retested the channel resistance. Moreover, the price sits above the 30-SMA with the RSI over 50, indicating a strong bullish bias. 

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However, since the price recently rose to the channel resistance, it might now pull back to retest the SMA or the channel support. Still, bulls will remain in control as long as the price stays within the channel. Furthermore, with bulls in the lead, the USD/CAD pair could soon break past the 1.3650 resistance level.

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• EUR/USD regained balance well past the 1.0800 barrier.
• The ECB is largely expected to keep rates unchanged.
• Investors’ attention now shifts to US CPI data.

Another downturn in the US Dollar (USD) prompted a decent upward surge in EUR/USD, once again revisiting the 1.0860 region at the beginning of the week.

Simultaneously, the positive session in US yields across different maturity periods and German 10-year bund yields accompanied the movement in the pair, always amidst an unchanged monetary policy framework.

In the meantime, both the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to embark on easing cycles, potentially starting in June. However, the pace of subsequent interest rate cuts may differ, potentially leading to divergent strategies between the two central banks. Nevertheless, it is anticipated that the ECB will not significantly lag behind the Fed.

According to the FedWatch Tool provided by CME Group, the likelihood of a rate cut in June retreated to approximately 51%, up from nearly 62% a week ago.

Regarding the ECB, the Accounts from its March 6-7 meeting published last week revealed an increasing sense of confidence among policymakers regarding the trajectory of inflation towards their 2% target, bolstering the case for implementing interest rate cuts.

Looking ahead, the relatively subdued fundamentals of the eurozone, coupled with the growing probability of a “soft landing” for the US economy, reinforce expectations of a stronger Dollar in the medium term, especially as both the ECB and the Fed may introduce easing measures almost simultaneously.

In such a scenario, EUR/USD could undergo a more pronounced decline, initially targeting its year-to-date low around 1.0700 before potentially revisiting the lows observed in late October 2023 or early November below 1.0500.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, the EUR/USD is expected to face initial resistance at the March high of 1.0981 (March 8), followed by the weekly top of 1.0998 (January 11) and the psychological barrier of 1.1000. Further advances from here may result in a December 2023 peak of 1.1139 (December 28).

On the other hand, another test of the April low of 1.0724 (April 2) and the 2024 low of 1.0694 (February 14) cannot be ruled out. The low in November 2023 is 1.0516 (November 1), followed by the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

The 4-hour chart shows the resumption of the upward bias. That said, the pair initially targets 1.0876 ahead of 1.0942. In the other direction, the next clear downward barrier appears to be 1.0724, followed by 1.0694 and 1.0656. The Moving Average Convergence Divergence (MACD) maintained the positive stance, and the Relative Strength Index (RSI) rose to around 61.

• EUR/USD regained balance well past the 1.0800 barrier.
• The ECB is largely expected to keep rates unchanged.
• Investors’ attention now shifts to US CPI data.

Another downturn in the US Dollar (USD) prompted a decent upward surge in EUR/USD, once again revisiting the 1.0860 region at the beginning of the week.

Simultaneously, the positive session in US yields across different maturity periods and German 10-year bund yields accompanied the movement in the pair, always amidst an unchanged monetary policy framework.

In the meantime, both the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to embark on easing cycles, potentially starting in June. However, the pace of subsequent interest rate cuts may differ, potentially leading to divergent strategies between the two central banks. Nevertheless, it is anticipated that the ECB will not significantly lag behind the Fed.

According to the FedWatch Tool provided by CME Group, the likelihood of a rate cut in June retreated to approximately 51%, up from nearly 62% a week ago.

Regarding the ECB, the Accounts from its March 6-7 meeting published last week revealed an increasing sense of confidence among policymakers regarding the trajectory of inflation towards their 2% target, bolstering the case for implementing interest rate cuts.

Looking ahead, the relatively subdued fundamentals of the eurozone, coupled with the growing probability of a “soft landing” for the US economy, reinforce expectations of a stronger Dollar in the medium term, especially as both the ECB and the Fed may introduce easing measures almost simultaneously.

In such a scenario, EUR/USD could undergo a more pronounced decline, initially targeting its year-to-date low around 1.0700 before potentially revisiting the lows observed in late October 2023 or early November below 1.0500.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, the EUR/USD is expected to face initial resistance at the March high of 1.0981 (March 8), followed by the weekly top of 1.0998 (January 11) and the psychological barrier of 1.1000. Further advances from here may result in a December 2023 peak of 1.1139 (December 28).

On the other hand, another test of the April low of 1.0724 (April 2) and the 2024 low of 1.0694 (February 14) cannot be ruled out. The low in November 2023 is 1.0516 (November 1), followed by the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

The 4-hour chart shows the resumption of the upward bias. That said, the pair initially targets 1.0876 ahead of 1.0942. In the other direction, the next clear downward barrier appears to be 1.0724, followed by 1.0694 and 1.0656. The Moving Average Convergence Divergence (MACD) maintained the positive stance, and the Relative Strength Index (RSI) rose to around 61.

• EUR/USD regained balance well past the 1.0800 barrier.
• The ECB is largely expected to keep rates unchanged.
• Investors’ attention now shifts to US CPI data.

Another downturn in the US Dollar (USD) prompted a decent upward surge in EUR/USD, once again revisiting the 1.0860 region at the beginning of the week.

Simultaneously, the positive session in US yields across different maturity periods and German 10-year bund yields accompanied the movement in the pair, always amidst an unchanged monetary policy framework.

In the meantime, both the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to embark on easing cycles, potentially starting in June. However, the pace of subsequent interest rate cuts may differ, potentially leading to divergent strategies between the two central banks. Nevertheless, it is anticipated that the ECB will not significantly lag behind the Fed.

According to the FedWatch Tool provided by CME Group, the likelihood of a rate cut in June retreated to approximately 51%, up from nearly 62% a week ago.

Regarding the ECB, the Accounts from its March 6-7 meeting published last week revealed an increasing sense of confidence among policymakers regarding the trajectory of inflation towards their 2% target, bolstering the case for implementing interest rate cuts.

Looking ahead, the relatively subdued fundamentals of the eurozone, coupled with the growing probability of a “soft landing” for the US economy, reinforce expectations of a stronger Dollar in the medium term, especially as both the ECB and the Fed may introduce easing measures almost simultaneously.

In such a scenario, EUR/USD could undergo a more pronounced decline, initially targeting its year-to-date low around 1.0700 before potentially revisiting the lows observed in late October 2023 or early November below 1.0500.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, the EUR/USD is expected to face initial resistance at the March high of 1.0981 (March 8), followed by the weekly top of 1.0998 (January 11) and the psychological barrier of 1.1000. Further advances from here may result in a December 2023 peak of 1.1139 (December 28).

On the other hand, another test of the April low of 1.0724 (April 2) and the 2024 low of 1.0694 (February 14) cannot be ruled out. The low in November 2023 is 1.0516 (November 1), followed by the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.

The 4-hour chart shows the resumption of the upward bias. That said, the pair initially targets 1.0876 ahead of 1.0942. In the other direction, the next clear downward barrier appears to be 1.0724, followed by 1.0694 and 1.0656. The Moving Average Convergence Divergence (MACD) maintained the positive stance, and the Relative Strength Index (RSI) rose to around 61.

EUR/USD Current price: 1.0828

• Encouraging Eurozone macroeconomic data fell short of boosting the Euro.
• US Consumer Price Index and the European Central Bank decision stand out this week.
• EUR/USD is technically neutral, limited buying interest favors a near-term slide.

The EUR/USD pair trades with a softer tone on Monday, down a handful of pips from its daily opening at 1.0835. The US Dollar is mixed across the FX board, particularly weak against commodity-linked rivals amid Gold soaring to fresh record highs, while grinding north vs European currencies.

The Euro is down despite mostly encouraging macroeconomic data from the Union. Germany reported that Industrial Production rose 2.1% MoM in February, beating expectations, while the Eurozone Sentix Investor Confidence improved to -5.9 in April from -10.5 in the previous month. The macroeconomic calendar, however, will remain scarce until Wednesday, when the United States (US) will publish the March Consumer Price Index (CPI). The European Central Bank (ECB) monetary policy announcement will follow on Thursday.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is little changed for a third consecutive day. The pair develops below all its moving averages in the daily chart, with a bearish 20 Simple Moving Average (SMA) gaining downward traction and providing dynamic resistance at 1.0845. At the same time, technical indicators stand directionless right below their midlines, offering a neutral stance.

EUR/USD is neutral-to-bearish in the near term. A bullish 20 SMA is about to cross a bearish 100 SMA, both a handful of pips above the current level. Technical indicators, in the meantime, head nowhere within neutral levels. The pair has a limited downward scope as demand for the US Dollar seems subdued across the FX board. Nevertheless, advances beyond the mentioned 1.0845 level seem unlikely.

Support levels:  1.0800 1.0750 1.0715

Resistance levels: 1.0845 1.0880 1.0920

EUR/USD Current price: 1.0828

• Encouraging Eurozone macroeconomic data fell short of boosting the Euro.
• US Consumer Price Index and the European Central Bank decision stand out this week.
• EUR/USD is technically neutral, limited buying interest favors a near-term slide.

The EUR/USD pair trades with a softer tone on Monday, down a handful of pips from its daily opening at 1.0835. The US Dollar is mixed across the FX board, particularly weak against commodity-linked rivals amid Gold soaring to fresh record highs, while grinding north vs European currencies.

The Euro is down despite mostly encouraging macroeconomic data from the Union. Germany reported that Industrial Production rose 2.1% MoM in February, beating expectations, while the Eurozone Sentix Investor Confidence improved to -5.9 in April from -10.5 in the previous month. The macroeconomic calendar, however, will remain scarce until Wednesday, when the United States (US) will publish the March Consumer Price Index (CPI). The European Central Bank (ECB) monetary policy announcement will follow on Thursday.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair is little changed for a third consecutive day. The pair develops below all its moving averages in the daily chart, with a bearish 20 Simple Moving Average (SMA) gaining downward traction and providing dynamic resistance at 1.0845. At the same time, technical indicators stand directionless right below their midlines, offering a neutral stance.

EUR/USD is neutral-to-bearish in the near term. A bullish 20 SMA is about to cross a bearish 100 SMA, both a handful of pips above the current level. Technical indicators, in the meantime, head nowhere within neutral levels. The pair has a limited downward scope as demand for the US Dollar seems subdued across the FX board. Nevertheless, advances beyond the mentioned 1.0845 level seem unlikely.

Support levels:  1.0800 1.0750 1.0715

Resistance levels: 1.0845 1.0880 1.0920

• AUD/USD revisited the 0.6600 region on Monday.
• Further upward bias looks likely for the time being.
• Australia’s Consumer Confidence is due on Tuesday.

The slight downward pressure on the US Dollar (USD) seems to have been enough to spark a marked rebound in the Aussie dollar, lifting AUD/USD back to the 0.6600 barrier at the beginning of a new trading week.

At the same time, the ongoing surge in copper prices, reaching levels not seen since April 2022 around $815.00, and a minor uptick in iron ore prices, which breached the critical $100.00 mark per tonne, bolstered the upward momentum of the Australian dollar.

Moreover, analysts anticipate that recent encouraging results from Chinese PMIs and the anticipation of potential stimulus measures from the government and the PBoC will keep the positive bias unchanged around the AUD. Consistent improvements in economic indicators are crucial for strengthening the Australian currency and potentially starting a sustained uptrend in AUD/USD.

Regarding the Reserve Bank of Australia (RBA), the release of its March meeting Minutes last week confirmed the central bank’s stance on refraining from tightening monetary policy. Unlike the February session, there was no discussion about increasing the cash rate target in March. So far, RBA cash rate futures still suggest an expectation of nearly 50 basis points of policy rate cuts in 2024.

It is worth noting that the RBA is among the last G10 central banks expected to consider interest rate adjustments this year.

Due to the divergence in monetary policy timelines between the RBA and the Fed, the Australian dollar could gain momentum later in the year, potentially leading to further appreciation in AUD/USD. If the pair surpasses the December 2023 peak of 0.6871, it may target the significant level of 0.7000 in the near future.

AUD/USD daily chart

AUD/USD short-term technical outlook

AUD/USD is expected to challenge its March high of 0.6667 (March 8) before reaching its December 2023 top of 0.6871 (December 28). Further north, monthly peaks of 0.6894 (July 14) and 0.6899 (June 16) occur prior to the key 0.7000 mark.

If sellers regain control, the pair may fall to its April bottom of 0.6480 (April 1), then the March low of 0.6477 (March 5), and finally the 2024 low of 0.6442 (February 13). Breaking below this level may force a test of 2023’s lowest level, 0.6270 (October 26), before the round level of 0.6200.

Looking at the big picture, the pair is expected to continue its bullish trend if it convincingly surpasses the key 200-day SMA at 0.6543.

On the 4-hour chart, the pair’s constructive bias appears to be intact for the time being. The initial resistance is at 0.6619 ahead of 0.6634. On the other hand, new losses may cause the pair to retest 0.6480, then 06477, and eventually 0.6442. Furthermore, the MACD remained in the positive zone, and the RSI rose above 60.

• AUD/USD revisited the 0.6600 region on Monday.
• Further upward bias looks likely for the time being.
• Australia’s Consumer Confidence is due on Tuesday.

The slight downward pressure on the US Dollar (USD) seems to have been enough to spark a marked rebound in the Aussie dollar, lifting AUD/USD back to the 0.6600 barrier at the beginning of a new trading week.

At the same time, the ongoing surge in copper prices, reaching levels not seen since April 2022 around $815.00, and a minor uptick in iron ore prices, which breached the critical $100.00 mark per tonne, bolstered the upward momentum of the Australian dollar.

Moreover, analysts anticipate that recent encouraging results from Chinese PMIs and the anticipation of potential stimulus measures from the government and the PBoC will keep the positive bias unchanged around the AUD. Consistent improvements in economic indicators are crucial for strengthening the Australian currency and potentially starting a sustained uptrend in AUD/USD.

Regarding the Reserve Bank of Australia (RBA), the release of its March meeting Minutes last week confirmed the central bank’s stance on refraining from tightening monetary policy. Unlike the February session, there was no discussion about increasing the cash rate target in March. So far, RBA cash rate futures still suggest an expectation of nearly 50 basis points of policy rate cuts in 2024.

It is worth noting that the RBA is among the last G10 central banks expected to consider interest rate adjustments this year.

Due to the divergence in monetary policy timelines between the RBA and the Fed, the Australian dollar could gain momentum later in the year, potentially leading to further appreciation in AUD/USD. If the pair surpasses the December 2023 peak of 0.6871, it may target the significant level of 0.7000 in the near future.

AUD/USD daily chart

AUD/USD short-term technical outlook

AUD/USD is expected to challenge its March high of 0.6667 (March 8) before reaching its December 2023 top of 0.6871 (December 28). Further north, monthly peaks of 0.6894 (July 14) and 0.6899 (June 16) occur prior to the key 0.7000 mark.

If sellers regain control, the pair may fall to its April bottom of 0.6480 (April 1), then the March low of 0.6477 (March 5), and finally the 2024 low of 0.6442 (February 13). Breaking below this level may force a test of 2023’s lowest level, 0.6270 (October 26), before the round level of 0.6200.

Looking at the big picture, the pair is expected to continue its bullish trend if it convincingly surpasses the key 200-day SMA at 0.6543.

On the 4-hour chart, the pair’s constructive bias appears to be intact for the time being. The initial resistance is at 0.6619 ahead of 0.6634. On the other hand, new losses may cause the pair to retest 0.6480, then 06477, and eventually 0.6442. Furthermore, the MACD remained in the positive zone, and the RSI rose above 60.

The Pound Canadian Dollar (GBP/CAD) exchange rate firmed last week despite general weakness in the Pound (GBP), as the Canadian Dollar (CAD) was dented by waning strength in the US Dollar (USD) and worse-than-expected domestic PMIs.

At the time of writing, GBP/CAD is trading at C$1.7153, having risen by more than 0.3% in the past seven days.

Canadian Dollar (CAD) Exchange Rates Tumble on Poor Domestic Data

The Canadian Dollar faced numerous headwinds last week as PMIs missed expectations and Canada’s unemployment rate exceeded forecasts. An uptrend in oil prices failed to boost the currency sustainably against its peers, alongside volatile risk sentiment – which ordinarily supports the US Dollar and the ‘Loonie’ along with it.

On Monday, Canada’s manufacturing PMI for March printed at 48.9 rather than the 50.3 forecast, remaining unexpectedly in contraction territory. The data marked the eleventh consecutive month in contraction.

Yet the ‘Loonie’ initially shrugged off headwinds, climbing against the Pound. An oil price uptick may have been behind the surge in CAD support.

Into Tuesday however, CAD/GBP flatlined: trepidation amongst US Dollar investors ahead of key jobs data may have spilled across to affect ‘Loonie’ sentiment.

Midweek, the Canadian Dollar Pound exchange rate took a decisive downturn following the release of March’s services PMI, which printed at 46.4. This marked the tenth month of contraction, reflecting subdued market demand.

Paul Smith, economics director at S&P Global Market Intelligence, summarised:

‘Canada’s services economy remained mired in a downturn during March, with both activity and new business volumes declining again… The restrictive impact on market activity of high prices and elevated interest rates remains plain to see.’

CAD losses were subsequently extended into the end of the week, compounded on Thursday by a weaker USD following increased jobless claims data; and Canada’s own employment release on Friday, which revealed a greater-than-expected increase in unemployment.

Pound (GBP) Exchange Rates’ Gains Undermined by June Rate Cut Forecast

The Pound softened against several of its peers last week, though managed to climb against the ‘Loonie’ given CAD headwinds.

Monday’s Easter bank holiday left Sterling exposed to losses at the start of the week; GBP/CAD managed to make some gains on Tuesday though, amid unexpected growth in the UK’s manufacturing sector.

On Wednesday morning, a lack of domestic UK data dampened GBP traders’ enthusiasm. Speculation around interest cuts from the Bank of England (BoE) inspired headwinds, as analysts at Goldman Sachs reiterated forecasts of a June rate cut.
Experts predicted that inflation is likely to ease further in the near term, saying in a note:

‘We find that the pass-through effects from higher energy and food prices will unwind rapidly in coming months.’

Into the second half of the week, however, GBP/CAD climbed. On Thursday, the UK’s finalised services PMI for the month of March missed expectations, yet Sterling firmed against the Canadian Dollar. While services data broadly disappointed, investors were reminded that activity in the sector has remained firmly above the 50-point mark for five months.

On Friday, the UK’s construction PMI printed above forecasts at 50.2, potentially capping losses as UK house prices were shown to have fallen in March. Halifax mortgage specialists putting the data down to sticky inflation and a generally weaker risk appetite.

GBP/CAD Forecast: BoC Rate Decision on Horizon

This week, investors will be contemplating the Bank of Canada (BoC)’s interest rate decision midweek, in which the central bank is expected to keep interest rates on hold at 5%.

At the end of last month, the bank’s Senior Deputy Governor Carolyn Rogers asserted that the BoC still needed to finish the job on inflation, saying:

‘Low Canadian productivity is an emergency. Canada urgently needs to boost productivity to help hedge against the risk of higher inflation.’

If BoC speakers maintain a hawkish tone midweek, the ‘Loonie’ may climb.

In the meantime, the British Retail Consortium (BRC) is expected to reveal an increase in retail sales for the month of February, on an annualised basis. The Pound could enjoy tailwinds if the data prints as expected.

On Friday, UK GDP data will be released. The economy is forecast to have expanded in February: consequently, Sterling may enjoy support against its peers.