Today was the first day of a three-day gauntlet for FX traders, with the FOMC tomorrow and US retail sales Thursday (along with a PBOC decision).
The pound is the big winner today but the Canadian dollar isn't too far behind as it gets some help from a strong rebound in oil prices. Narrowing rate differentials are also helping with the terminal Fed rate now priced at 5.275% compared to 5.08% in Canada. A surprise from the Fed and BOC could flip that, though it's unlikely.
The main trade in markets today is better global growth, in part due to PBOC cuts (with more to come). There's also an increasingly belief that a soft-landing is within reach in the global economy, with risks tilted towards higher inflation rather than lower growth.
That could change with the data that's to come but if the bulls win out, this is an intriguing pair. The range bottom since November is 1.3226, which is just 60 pips away. Below that clears the way for a test of 1.3000 or even 1.2800.
