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The Pound to Canadian Dollar exchange rate week ahead forecast looks for 1.8470 to be tested.
GBP/CAD was unable to break through the massive glass ceiling at 1.87 late May, in the process confirming a 'double top' technical pattern in the process (the March and May peaks).
From here, a continuation of the drift lower looks likely to us, and we think a test of the 50-day exponential moving average - now at 1.8470 - is in store soon.
Still, the broader multi-month trend remains to the upside, but a deeper consolidative period is underway, which could carry us through the Northern Hemisphere's summer months, denying UK-based CAD buyers the opportunity to transact at multi-year highs.
Above: GBP/CAD at daily intervals.
To be sure, zooming out a bit on the charts shows these are still excellent levels for those buying CAD on an historical basis, but it might be some time before fresh highs are on tap again.
Weighing on GBP/CAD is last week's above-consensus Canadian employment figures that justify the Bank of Canada's decision made earlier in the week to keep interest rates unchanged.
In fact, it looks as though the Bank might cut just once more in the current cycle, which will prop up Canadian bond yields and relieve pressure on CAD.
Following Friday's employment report, Goldman Sachs economists removed a cut from their policy forecasts. They now expect the Bank to cut once this year to a terminal rate of 2.50%.
"While the labour market data was soft and the continued rise in the unemployment rate seems to confirm below trend growth, the weakness does not yet seem broad enough to prompt the BoC to cut imminently. Plus, the BoC still faces a difficult tradeoff between inflation and growth risks," says a weekly FX research note from Goldman Sachs.
"We think a more hawkish BoC, alongside better growth later this year, should support a stronger Canadian Dollar," it adds.
USD/CAD has ground lower since Goldman Sachs last revised its forecasts to show greater CAD appreciation in late-April. "We expect this pace of appreciation to continue and reiterate our optimistic view on the currency," says the Wall Street bank.
An additional headwind for GBP/CAD is receding trade tensions with China and the U.S. sending their trade negotiators to London this week to hash out a resolution on various sticking points required to unlock the trade accord recently agreed in Geneva.
"While Xi Jinping’s administration has shown determination not to bow down to Trump’s tariff intimidation, having already been forging deeper trading relationships with other nations, there are hopes that both sides will want to agree on a deal," says Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The U.S. is seeking to restore flows of critical minerals, and China is seeking tariff reductions and an easing of export controls.
Progress here will settle nerves about the trade war and ultimately point to an overall tariff burden that is lower than a counterfactual where China and the U.S. fail to reach a resolution on outstanding issues.
This will help the U.S. Dollar and the Canadian Dollar, as the two North American currencies tend to benefit when trade tensions recede.