The GBP/CAD has broken to a new high for the year following a period of consolidation. As well as ongoing weakness for the Canadian dollar, we have seen renewed strength for the British pound, which has rallied as opinion polls over the weekend showed support for UK Prime Minister Boris Johnson’s Conservative party rising to their highest levels since 2017. Johnson has pledged to overhaul business rates in an effort to step the rapid decline of the High Street. But in a surprise move, he has also scrapped a plan to cut the corporation tax to 17 from 19%, in order to prioritize public spending instead. Meanwhile, the Canadian dollar has been falling since the end of last month after the Bank of Canada proved to be more dovish over its outlook for interest rates than expected amid trade and other global uncertainties.
It will be a busy week for the Canadian dollar. Here is what’s on the agenda over the next four days:
- Canadian manufacturing sales will be released on Tuesday. Sales are expected to have fallen 0.5% after a 0.8% rise the month before. A reading worse than this could weigh heavily on the loonie.
- BoC Governor Stephen Poloz will be speaking on Thursday about economic change and the path forward at a fireside chat, in Toronto.
Ahead of the above data releases, the GBP/CAD has, as mentioned, broken out to a new high for the month above old resistance at 1.7090/95 area. This was a sturdy resistance level previously, so the fact that rates have finally broken above it means the path of least resistance continues to be to the upside and will remain that way until and unless something changes dramatically. The above data releases have the potential to change the bullish technical trend. But right now, the buyers seem to be in control, and they would be looking to defend their key support levels, starting at that 1.7090/95 area, which was previously resistance. If the bullish trend continues, as we suspect it might, then rates could head towards 1.7315 area next, which was the low prior to the breakdown back in May.