"Now I am not endorsing 4.5%, but what you may have noticed in December is that we did not include the comment that we made in November about the market being in our view rather out of line" - Bank of England Governor Andrew Bailey.

Image © Adobe Stock

The Pound to Canadian Dollar exchange rate remained buoyant near one-month highs in the penultimate session of the week but could have scope to rise further, according to technical analysis from Scotiabank, which suggests Sterling could recover the 1.68 handle in the days ahead.

Sterling rose against all major currencies for the week to Thursday with GBP/CAD and GBP/AUD notching up the largest gains in the G10 grouping while GBP/BRL, GBP/RUB and GBP/ZAR were top performers in G20.

"We noted previously that price action formed a bullish price signal (engulfing line) against the Fibonacci support point, with the bull case for the GBP bolstered by the cross’ move out of the downward-sloping channel off the Dec high," says Shaun Osborne, chief FX strategist at Scotiabank.

"Strong gains in the pound today put the cross on course for a relatively quick retest of the late 2022 high at 1.6845. Support is (a relatively distant) 1.6450 now," Osborne writes in a Wednesday review of the Canadian Dollar charts.

Sterling remained close to recent highs against many currencies on Thursday despite widespread declines for stocks and bonds.

Above: Pound to Canadian Dollar rate shown at daily intervals with Fibonacci retracements of 2022 decline indicating possible areas of technical resistance for Sterling. Click image for closer inspection.

UK government bond yields edged higher but less so than U.S., Canadian and European counterparts, suggesting the latest commentary from Bank of England (BoE) Governor Andrew Bailey may have been overlooked in markets.

"We don’t target a particular peak, but what I will say is this, back in November, and quite unusually for us, we thought the market curve, and therefore the market’s view of what they thought we would do, was out of line with our own thinking," the Governor told a regional newspaper.

"It is now down to 4.5%. Now I am not endorsing 4.5%, but what you may have noticed in December is that we did not include the comment that we made in November about the market being in our view rather out of line," he added.

Sterling's outperformance came amid a flurry of Office for National Statistics (ONS) figures suggesting resilience in the UK economy, although Friday's release of retail sales figures for December could yet undermine that notion.

Above: Pound Sterling performance relative to G10 and G20 counterparts this week. Source: Pound Sterling Live. If you are looking to protect or boost your international payment budget you could consider securing today's rate for use in the future, or set an order for your ideal rate when it is achieved, more information can be found here.

Data out on Wednesday indicated that inflation slowed last month but also suggested services-producing companies were still pushing through large price increases despite the steepest rise Bank Rate since the late 1980s.

"This deceleration will have to become more pronounced over the next two months for the MPC to conclude that it can stop hiking Bank Rate by March," says Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"Naturally, the MPC will be more attuned to core inflation, which likely won’t fall as sharply as the food and energy inflation over the next six months. Indeed, the inflation rate for some core components, such as communication, will rise further this year," he adds.

Pay growth has also accelerated in some pockets of the labour force in recent months, data out on Tuesday suggests, while last week GDP figures indicated the economy had not deteriorated by November to the same extent envisaged by forecasters at the BoE and elsewhere.

Resilience owes itself mainly to the consumer side of the economy, however, with downturns in manufacturing and industrial sectors having deepened.

Source: Pantheon Macroeconomics. To optimise the timing of international payments, you can set a free FX rate alert here.