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GBP/CAD to 1.60?
GBP/CAD broke down significantly on Friday and this normally trending currency pair should be poised for further losses. Fundamentally, sterling should remain under pressure. Despite stronger than expected PMI numbers and the rise in U.K. rates, sterling has been unable to rise and in the coming weeks and now the focus will turn to the risk of Brexit. In contrast, the Canadian dollar has responded well to stronger data and should continue to outperform. Oil prices have been on the rise and Canada’s trade deficit turned into a surplus the month of November. This was significantly better than expected because economists were actually looking for a bigger deficit. More than 53K jobs were also created in December (all full time) and manufacturing activity expanded at its fastest pace since January according to the IVEY PMI report. This leads us to continue to expect further gains in the Canadian dollar, particularly against sterling.
Technically there is no major support in GBP/CAD until 1.62 and if that breaks, the currency pair should hit 1.60. The downtrend remains intact as long as the currency pair remains below 1.65.