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GBP/CAD – Back to 1.74?
Better than expected UK PMI numbers confirmed the bottom in GBP/USD that was days in the making. Manufacturing activity accelerated in the month of May thanks in part to the sharp decline in the currency. Looking ahead, we expect similar strength in the service and construction PMI reports especially given the improvement in consumer confidence. This should foster further gains for sterling, especially versus the Canadian dollar after President Trump killed the NAFTA deal with the request for a sunset clause
that would require NAFTA to be renegotiated in 5 years unless both parties agreed to renew – a term that the Canadians quickly rejected. What appeared to be a done deal is now very much up in the air and until there’s a positive resolution, the Canadian dollar will have a tough time rallying.
Technically, GBPCAD has found its way back to the 20-day SMA and given the strength of the past 2 day’s moves, we expect the pair to blow past this resistance level on its way up to 1.74.