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GBP/CAD Edges Lower As U.K. Business Output Falls Short Of Market Forecast -

May, 11th 13:58

The British Pound has been edging higher versus a number of its major peers, although the appreciation has been limited. The uptrend was initiated by positive trade balance data as March’s Total Trade Balance was forecast to indicate a deficit reduction from -£4.3 billion to -£4.2 billion, but the actual result dropped to -£3.83 billion. The narrowing trade deficit reflected a £0.4 billion increase in exports to £23.7 billion in March.

However, today’s unexpected contraction in UK Industrial & Manufacturing production (by 0.3% and 0.1% respectively) has been dragging on the British Pound, as it gives the BoE greater scope to retain the record-low interest rates for an extended period of time. Meanwhile, crude prices fell on Wednesday as oil sands production in Canada restarted, and already record-high inventories (especially in the United States) seem to be growing even further. As a result, the Loonie has been weakening.

Furthermore, trade and employment numbers have depreciated the CAD, with the trade deficit in March unexpectedly widened to a record C$3.41 billion ($2.66 billion) as exports sank for a second month. The downward pressure on the economy, associated with the impact of the wild fires and trade deterioration could bring the Bank of Canada (BoC) back into action in form of a rate cut sooner than originally anticipated.

Next up for the Canadian dollar will be the release of the U.S. crude oil inventories later today. The United States remains the biggest destination for Canadian oil. A reduction of inventories would boost global crude prices, and demand and revenues for Canadian producers.


Fig. GBPCAD D1 Technical Chart

On the daily chart, the Pound Sterling to Canadian Dollar is currently ticking down to 1.86063, moving in a narrow range. Despite the green parabolics SAR showing a possible bullish trend being formed, the pair is expected to test the support at 1.84345 before bouncing back. RSI is 56.37, indicating an unclear direction.

Trade suggestion

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