Image © Bank of Canada
The Pound looks set to trend lower against the Canadian Dollar in the near term.
The Pound to Canadian Dollar exchange rate (GBP/CAD) trades unchanged at 1.8411 on Monday, confirming this to be one GBP pair that is not rallying:
If we cast our eye elsewhere on the market, we can see the Pound is making decent gains against the majority of its G10 peers as it tries to undo some of this month's underperformance.
That CAD is resisting GBP's advance speaks of its own outperformance on Monday: the North American currency bloc is doing well now that the EU and U.S. have struck a new trade accord.
The EU deal was the major outstanding gap in the trade war puzzle that needed filling. Its completion brings a sigh of relief to markets and allows the U.S. Dollar to rally.
Regular readers will know that the CAD has been tracking the USD's performance on most crosses, ensuring that GBP/CAD has been shadowing GBP/USD.
This means any further USD strength on trade relief will weigh on GBP/CAD.
For this reason, we are minded to keep the annotations we made in our Week Ahead Forecast two weeks ago. We predicted GBP/CAD rallies would likely be short-lived and a move to 1.83 would ultimately transpire.
Given what we are seeing this Monday and the weekened news of a trade accord, we are minded to maintain this prediction.
