- GBP/CAD sees fresh upside impetus
- Strong resistance zone to be challenged soon
- Sell America trade resumes, weighs on CAD
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The Pound is on the offensive against the Canadian Dollar, but could soon meet resistance.
The Pound to Canadian Dollar exchange rate (GBP/CAD) is forecast to maintain a constructive tone over the coming days, with a rise to 1.8716 being a possibility.
Pound Sterling starts the new week with a spring in its step, pushing GBP/CAD through the interim resistance line at 1.8599, which had capped strength through much of March, April and May.
If the pair can hold the gains into the day's close, then we would be highly confident that 1.8716, the 2025 high, is touched next.
Above: GBP/CAD at daily intervals.
For now, we annotate in our Week Ahead Forecast chart that the resistance here will hold, and allow for a pullback, potentially back to 1.8599, which would have flipped in nature from resistance to support.
The Canadian Dollar is struggling at the start of the new week on account of fresh "sell America" fears following a decision by Moody's to lower its U.S. sovereign debt ratings.
The move indicates the agency has concerns about the sustainability of the U.S. debt pile, which will continue to balloon if President Donald Trump's spending bill is passed by Congress this week. Far from getting debt dynamics under control, Trump will oversee fresh peaks in the country's overall debt burden.
"Following the Moody’s downgrade, US Equity futures and the dollar are starting the week weaker, as markets resume the 'sell America' trade," says Thanim Islam, Head of FX Analysis at Equals Money.
For the Canadian Dollar, "sell America" is clearly unhelpful, and it is under pressure against the Pound, Euro and other alternative currencies.
The 30-year U.S. treasury yield rose back to the psychological 5% level following the Moody's downgrade, and S&P 500 Index futures slid.
Moody’s said on Friday it was stripping the U.S. government of its top credit rating, dropping the country to Aa1 from Aaa.
This week will see the U.S. Congress pass Trump's "Big Beautiful Bill" which wraps together various Trump administration objectives into one substantial piece of spending and tax legislation.
The fall in North American currencies suggests markets are concerned about where things are heading.
"The US has an additional problem: whatever the Republican Congress decides to do with fiscal policy over the next few weeks, it will most likely be "locked in" for the remainder of the decade," says George Saravelos, Head of FX Research at Deutsche Bank.
"The very difficult reconciliation process and the potential loss of a Republican majority in the mid-terms essentially leaves space for only one major fiscal event during the current Trump administration. Once this concludes, there will be very little that can be done to change the fiscal trajectory for the foreseeable future," he explains.
The U.S. is Canada's most important neighbour in terms of trade and financial market integration. Trouble down south spells trouble up north, and explains why CAD might struggle as long as U.S. fiscal concerns persist.