Currency investors should consider buying GBP/CAD this week, advises CitiFX in its weekly FX pick to clients.
"ST positioning data suggests the market is short GBP. In the past few weeks the first hike, as priced by short rates, has been pushed out to May 2017 despite only modest shift in short-term inflation swaps. Data since the last BoE meeting has been mixed and not entirely bad (lower UR, faster retail sales, strong credit growth). For us, this skews risks in the hawkish direction for Thursday’s BoE...
...CAD has slightly outperformed its commodity currency peers. We suspect there is scope for it to play catch-up, so short CAD positions should offer more attractive risk-return for those looking to position for further deterioration in sentiment," Citi says as a rationale behind this call.
In line with this view, Citi recommends buying GBP/CAD from 2.0581, with a target at 2.08, and a stop at 2.0415.
