- GBP/CAD supported at 1.73, but struggling with 1.74

- Consolidation could be seen in busy week for UK data

- UK job figures eyed ahead of CA inflation, retail sales

Image © Bank of Canada.

GBP/CAD reference rates at publication:Spot: 1.7400Bank transfer rates (indicative guide): 1.6795-1.6917Money transfer specialist rates (indicative): 1.7250-1.7280More information on securing specialist rates, hereSet up an exchange rate alert, hereThe Pound-to-Canadian Dollar rate had the wind in its sails and 1.74 in sight following a strong start to the new week but could now struggle to advance much beyond Monday's levels.

Canada’s Dollar was an underperformer on Monday amid fresh declines for oil prices and as investors digested confirmation that a general election will be held in Canada on September 20.

But Canadian firms say it has few if-any implications for the currency, which leaves GBP/CAD with little else to take cues from except the full sleight of economic data due out of both countries.

“This campaign might be more of interest to equities, since on the key bond market variable, the federal deficit, the two leading parties aren’t likely to differ widely,” says Avery Shenfeld, chief economist at CIBC Capital Markets.

The Pound-to-Canadian Dollar rate has been unable to sustain itself for long above the 1.74 handle in recent weeks, and may be unlikely to suddenly do so over the coming days, although it may find the nearby 200-day moving-average at 1.73 offering support in the event of weakness.

Above: Pound-to-Canadian Dollar rate shown at daily intervals.

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Sterling could be sensitive on Tuesday to the release of employment numbers for June and July’s inflation figures on Wednesday ,while the Loonie will look to Wednesday and Friday respectively for its own inflation and retail sales figures.

The point of most interest to the Loonie this week will likely be Statistics Canada’s advanced estimate of July retail sales that will be included in June’s data at 13:30 on Friday, as this would provide early insight into the likely pace of consumer spending and economic growth at the opening of the third quarter.

In the meantime, an underappreciated influence could come on Tuesday from Federal Reserve Chairman Jerome Powell’s appearance in an online town hall event and on Wednesday from minutes of last month’s Fed meeting if either keeps the U.S. Dollar on its front foot.

“The tapering drumbeat from Federal Reserve policy is getting louder and more persistent it does appear and that perhaps focuses market attention a little more intently on the Jackson Hole Fed symposium at the end of the month,” says Shaun Osborne, chief FX strategist at Scotiabank.

Above: USD/CAD shown at daily intervals with major moving-averages and Fibonacci retracements of June recovery indicating possible areas of support.

“With the GBP holding roughly midway between 1.70-1.79, there is little incentive for markets to really push the GBP one way or the other from a risk/reward point of view,” Osborne and colleagues wrote in a note last week.

If the Fed’s steady shift toward tapering its quantitative easing programme keeps the U.S. Dollar on the offensive the Pound-to-Canadian Dollar rate could remain buoyant in part due to its positive correlation with USD/CAD.

“USD/CAD could still be forming a smaller base, which would be confirmed with a break above the 200-day average at 1.2569/2608,” says David Sneddon, head of technical analysis at Credit Suisse, who looks for USD/CAD to hold above 1.25 during the weeks ahead.

“Near-term support stays at 1.2489/74, below which would negate the smaller basing potential and trigger a retest of 1.2429/08, but with buyers still expected to show here,” Sneddon adds.

The Pound-Canadian Dollar rate always closely reflects the relative performance of the main Sterling exchange rate GBP/USD and USD/CAD, and could come under pressure alongside any fall in USD/CAD this week and vice versa.

Above: Pound-to-Canadian Dollar rate shown at weekly intervals.