Although sterling traded higher against the greenback today, we believe that it is vulnerable to further weakness as U.K. data worsens. Industrial production rose only 0.1% in the month of February and manufacturing production fell -0.2%. Although the trade deficit narrowed, the decline in exports and imports reflects weakness rather than strength. All of this follows last week's disappointing PMI reports.

Technically, GBP/CAD has support at 1.7800 but if this level is broken, we should see the pair extend down to 1.76. The weekly chart shows the pair's negative bias after having rejected the 200-week SMA.