Since the start of the month, the GBP/CAD pairing has experienced movement of around 5 cents, with current interbank levels above 1.70.

Over the last few weeks, well timed transfers at the highest points could have achieved approximately CAD $10,000 more than at the lowest points, which were in fact the lowest levels experienced since November 2017.

Currency Pair% Change in 1 monthDifference on £200,000
GBPCAD3.95%AUD $13,140

The spike in the loonie’s strength at the beginning of the month followed the signing of a new trade agreement between the United States, Mexico and Canada (USMCA), prior to which the US president had threatened to dismantle the previous North American Free Trade agreement (NAFTA).

The new agreement has widely been accepted as a positive move forward, but the CAD gains were short lived and sterling has regained the ground lost. This can be largely attributed to the suggestions that a potential deal was being finalised for the UK’s formal exit from the EU.

However, questions still remain as to how the GBP/CAD pairing will fare in the short term, as there is still no certainty that the UK and EU will come to an agreement, which could suggest that there is opportunity for the pairing to drop back below 1.70.

Is the Bank of Canada’s optimism unjustified?

Bank of Canada interest rate decision

A consideration for clients planning a transfer involving CAD will be the outcome of the Bank of Canada’s interest rate decision on Wednesday, in addition to the accompanying monetary policy statement from Governor Stephen Poloz.

Current expectations are that the Central Bank will raise interest rates by 0.25% to 1.75% following a hold on rates last month. This would set the rates at the highest they’ve been since 2008. A hike in interest rates is generally seen as positive for investors, and from a market perspective could result in favourable movement for the associated currency, so if the decision goes as expected, the CAD could see gains against GBP going into the weekend.

However, there is never the guarantee that a hike in interest rates will result in favourable market movement.

This was seen back in August when the Bank of England raised UK interest rates but the rather dovish monetary policy statement that followed affected sentiment in the currency and resulted in a short term sell-off for the GBP.

Therefore, clients planning a transfer involving CAD could benefit by considering their position early in the week and planning in anticipation of volatility.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.