Stephen Poloz indicated in his speech yesterday that interest rate hikes may be a possibility for the CAD in months to come with wage growth the way it is, the main issue with this being the unresolved NAFTA discussions taking place currently. The below table shows the difference in Canadian Dollars you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The Canadian Dollar saw volatility yesterday against the Pound, after slower UK Inflation figures released yesterday morning caused Sterling weakness, however GBP/CAD quickly rebounded during the afternoon following from the news that the Bank of Canada decided to keep Interest Rates on hold at 1.25%.
Bank of Canada Governor Stephen Poloz delivered a speech afterwards highlighting that he felt that Interest Rates could be raised over the coming months due to forecasts of increased wage growth. However he also stated that the main stumbling block for the Bank is the uncertainty surrounding the renegotiation of the North American Free Trade Agreement (NAFTA), which continues to weigh heavily on the value of the Canadian Dollar and therefore Investor sentiment, although a resolution is looking more likely over the coming weeks according to US Vice President Mike Pence.
The Canadian economy relies heavily on the price of oil with this being its largest export, and news earlier this week that the value of oil was on the rise had helped the Canadian Dollar to strengthen. It was also reported yesterday that Saudi Arabia, the top exporting country in the world, forecasts the value of oil to rise to $100 per barrel, which should certainly help the value of the Canadian Dollar to strengthen.
UK Retail Sales figures are released this morning at 9.30am and could have the capacity to create volatility for GBP/CAD rates. If these figures disappoint, as a fall from 0.8 to -0.5% is expected, we could see a move back towards 1.78.
The next key data release for the CAD will be on Friday when Canadian Retail Sales and Inflation figures will be released at 12.30pm. The expectation is for a rise in Inflation from 2.2% to 2.3%, well above the Bank’s target of 2%, if this is the case we could see further CAD strength.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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