GBP/CAD falls below 2.01!

Oil Prices and Brexit Casuing Volatility for Pound to Canadian Dollar Exchange Rates

The rally for the Canadian Dollar has continued unabated following strong GDP figures released yesterday morning. As a result, GBP/CAD is now at its lowest levels since we first journeyed above the 2.0 mark in July.

We have come close to this territory before, with GBP/CAD rebounding just as 2.01 was hit.

Currency markets are fickle. Arbitrary boundaries are created around whole numbers such as 2.01 or 2.00 which are hard to break through called ‘resistance levels’.

Currency traders at large banking institutions set in ‘limit orders’ or ‘stop losses’ at these levels, where currency is bought or sold automatically – either to prevent further losses or seize tempting opportunities.

This automatic buying or selling orders in the market group around these whole numbers such as 2.0 and 2.01, so that when they are reached you get a sudden backlash back upwards. In this instance, 2.00 may create a sudden sell off as CAD as selling levels become attractive again, and this selling of CAD reduces its demand on the markets, and therefore its value, causing GBP/CAD to rise once more.

So to move past 2.01 shows just how well markets received the strong GDP figures for the Canadian economy yesterday.

Today the release of data on business conditions in the manufacturing sector for the Canadian economy will likely push rates down further. With prolonged low oil prices, investment has diversified in this sector. As such these monthly readings have been regular strong performers which bolster confidence in the Canadian Dollar as well.

Anyone with a GBP/CAD requirement in the short term should seriously consider moving ahead of the event this afternoon. Any rebound in your favour once rates hit 2.0 rarely outstretch this initial move against your favour. Rates around the 2.01 mark may not be available by the end of the day.

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