Pound to retake top spot of G10 currencies for 2021?

02 Aug 2021

The Pound-to-Canadian Dollar exchange rate has strived to hold momentum above 1.7350 but may be on course to reclaim pole position this week among G10 major currencies for 2021, to surpass the year’s breakeven mark of 1.7380.

Sterling enjoyed a robust performance against several currencies last week as falling Covid cases sparked the attention of investors, traders and analysts. This led GBP/CAD to retest the 1.75 handle, albeit briefly.

Since then, the Pound-to-Canadian Dollar exchange rate has moved back towards the 1.73 mark, yet remained above the 200-day moving-average at 1.7291.

“Speculative FX traders have largely abandoned short USD positions in recent weeks and heightened equity market volatility—something of a “tradition” in August—will tend to work against the CAD and may lift USDCAD towards the upper reaches of our estimated range for next week (1.2508),” said Shaun Osborne, chief FX strategist at Scotiabank.

This week, GBP/CAD would trade within a range of 1.7288-to-1.75, whilst the GBP/USD rate tests the upper range of the forecast 1.3830-to-1.40 range.

Furthermore, a rise over the 1.7380 level would see Sterling move back into first place among major currencies for 2021, edging out the Canadian Dollar.

However, focus is on the outcome of the Bank of England’s policy decision and Monetary Policy Report on Thursday and the Pound’s sensitivity to anticipation, reports Pound Sterling Live. 

“Market participants are likely focusing on this week’s BoE policy meeting for guidance on the pound’s direction (although the consensus is for no change in policy settings, particularly as the delta variant adds a little more risk to the outlook),” Osborne added.

“The GBP’s clear rejection of key support on the weekly chart last week at 1.3670 and additional gains this week towards the 1.40 area suggest broader trends are tilting more positively for the GBP again—and potentially point to a retest of the low 1.42s,” Osborne said.