GBP/CAD 4H

Macro View:

GBP: While some positive expectations are already factored into the GBP ahead of the election, the Labour Party’s economic policies will take time to impact the Pound. However, a majority Labour government could bring political stability, boosting domestic investment. Combined with the Bank of England's expected easing cycle starting in August and continued growth in real incomes, this could help the UK economy recover in the second half of 2024. This scenario could support the GBP against the EUR, particularly if the BoE is less dovish than the ECB. Overall, with some positives already priced in, further economic data surprises would be needed to attract investors to GBP-denominated assets like UK stocks and support the currency.

CAD: The upside surprise in the latest Canadian CPI failed to give the CAD a long-lasting boost. The May increase in Canadian inflation to 2.9% year-over-year largely matched the BoC’s central scenario outlined in April. As a result, domestic money markets have reduced the chances of back-to-back rate cuts from 60% to 40%, without significantly altering the prospects of two cuts in the second half of 2024. Additionally, the latest Canada Job Report, released last Friday, revealed further weakness in employment conditions, with unemployment rising to 6.4% from 6.2% and employment change decreasing by approximately -1.4K from the previous 26.7K. This weaker-than-expected job gain and higher unemployment rate add complexity to Canada's economic outlook and suggests that the BoC may still consider further rate cuts to support the economy in the second half of 2024 despite a significant rose in May CPI.

FX View:

DXM: A Tool to Gauge Retail Sentiments

GBP/CAD Current Retail Long/Short Position

The DXM shows that 8% of traders are bullish, while the remaining 92% are bearish, reflecting the predominant retail sentiment. This sentiment offers a contrasting trading opportunity since retail traders tend to consistently lose money in the long term.

CAD Futures’ seasonality movement

The seasonal pattern for the CAD suggests bullish momentum in the near term but the latest economic development in Canada is not favor with this bullish seasonal pattern.

Sources: Prime Market Terminal

Disclaimer: This material is provided for informational purposes only and does not constitute financial, investment or other advice. No opinion contained in this material constitutes a recommendation by Trive International or its author as to any particular investment, transaction or investment strategy and should not be relied upon in making any investment decision. In particular, the information does not consider the individual investment objectives or financial circumstances of the individual investor Trive International shall not be liable for any loss, damage or injury arising from the use of this information. Trive International may or may not be able to provide equity in the companies. The value of your investment may go down as well as up.