GBPCAD is testing resistance near the 1.7300 level and the BoE’s Andy Haldane has boosted the pair by ruling out negative rates anytime soon. GBPCAD pushed through resistance on Monday and is looking for a catalyst to see further gains. The recent weakness in crude oil has supported the pound and this could continue if today’s inventories today comes in higher than expected. Crude oil is under pressure with the rise in virus cases and the restrictions on free movement in some countries. The threat of further lockdowns also weighs on oil as traders fear another hit to global growth.
The U.K. saw the releases of final GDP figures today, and although they showed a 0.2% improvement, this was not enough to see any meaningful advance in sterling.
The Bank of England’s (BoE) Andy Haldane gave a speech today and added to the recent statement by Dave Ramsden which suggested that negative rates were not imminent. Haldane said:
Judgements on negative rates will depend on the economic outlook at the time and in particular on whether that necessitates further monetary stimulus. If that condition was satisfied, any decision on negative rates would then depend on whether the balance of costs and benefits from using this tool was positive and whether this cost/benefit balance favoured negative rates over other monetary tools.
Haldane added that none of the required conditions were present at the moment and this will be a boost to Sterling. The U.K. currently has interest rates at 0.1%, which is a disadvantage compared to the Bank of Canada’s 0.25%. However, the BoC may trim rates in their upcoming meeting to support the economy and deal with an inflation rate that is hovering near deflationary territory at 0.1%.
GBPCAD Technical Outlook
GBPCAD managed to get through resistance on Monday to test the 50-day moving average near 1.7300 and this will be the headwind to further gains. A close near 1.7300 will see the pair rally further, while a close below 1.7150 would suggest another leg lower has begun. The ATFX Q4 Market Outlook is available now for free download. Please find it here.