By Gary Howes

The Canadian dollar (CAD) outlook appears to be weak for the first half of 2014 at least says one prominent analyst.

Sterling drove the GBP/CAD rate higher over the course of the past 24 hours, however we may see the pound give away some gains ahead of Canadian manufacturing sales data.

"We expect the pound has enough support to keep the rate above 1.8250 and so we expect some range bound trading," says analyst Sasha Nugent at Caxton FX.

A look at the global currency markets shows that the Canadian dollar exchange rate complex continues to feel the pressure:

The pound sterling to Canadian dollar exchange rate (GBP/CAD) is 0.47 pct higher at 1.8354.The euro to Canadian dollar exchange rate (EUR/CAD) is 0.77 pct higher at 15075.The US dollar to Canadian dollar exchange rate (USD/CAD) is 0.12 pct higher at 1.1017.Note: All CAD quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

The US dollar vs Canadian dollar tone was on the weak side again, but the pair continued to hover in some very tight ranges.

Outlook for the Canadian dollar

"The door feels like it is firmly open to a test of the 1.095-1.097 range, but [very weak] retail sales will need to act as a catalyst, and neither price action nor technicals suggest that there is much scope for a sharp move lower at this stage," says BMO analyst Stephen Gallo in a morning exchange rate outlook note.

Gallo does however expect decent bids into 1.095, and neither topside nor downside momentum appear like they will be easy to achieve in this somewhat ‘confused’ environment

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Maintaing a bearish stance on the outlook for the Canadian dollar is analyst Shaun Osborne at TD Securities:

"The CAD has picked up a little support in the aftermath of the Federal budget this week but the improved fiscal balances do not alter our view on the outlook for a still weaker CAD through the first half of this year at least.

"Improved budget data were widely telegraphed in the past few weeks and the return to budget surplus in 2015 was widely expected and a stated goal of the government. Canada’s AAA credentials remain intact but that doesn’t help an economy experiencing sluggish growth and low inflation pressure."

Commenting further, Gallo says:

"We look for minimal topside potential above 1.100 in front of 0830’s US retail sales report. Our economists are expecting a +0.1% MoM print in total, and we suspect USDCAD is already ‘prepared’ for something like flat or -0.1% at most. Technicals and price action don’t look like they currently support the case for a ‘break out’ in either direction just yet.

"For our medium-term CAD bearish stance, we also still need to see confirmation of closes above 1.098 in order to have more confidence, and a move back to 1.102 would still be helpful if we are to take the focus off a possible move to 1.095."

Risk sentiment took a dive though the overnight session, leaving Asian and European stocks in the red, the CHF and JPY in demand and the USD mostly lower against its G-10 counter-parts.

US 10-year yields have eased back modestly but remains above 2.70%.

The main G-10 FX under-performer on the session so far is the AUD (behind weaker data) but risk aversion and data have also weighed on EM FX.