This Canadian Dollar report will examine the factors that could affect exchange rates in the coming months to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low for the past month.
|Currency Pair||% Change||Difference on £200,000|
With the Canadian economy seemingly outperforming that of its UK counterpart, why is the CAD struggling to make an impact?
Despite multiple reports of continued economic well-being the CAD has actually struggled of late, particularly against the Pound. It has struggled to make any significant impact against Sterling since the turn of the year, with the Pound finding support despite facing its own set of problems. GBP/CAD rates have remained fairly range bound over the past week, with Sterling gaining enough support to boost its levels back above 1.73.
The CAD has managed to find some support just above this threshold but the current trend remains somewhat baffling, especially when you consider the relative health of both the UK & Canadian economies.
The on-going uncertainty surrounding Brexit is certainly having a significant impact on investors risk appetite, which in turn is causing them to move their funds away from the Pound. Despite Brexit talks progressing to phase two, it has done little to dispel the current negativity and as such the Pound is struggling to make any sustainable impact against the majority of major currencies.
The Canadian economy on the other hand was boosted by last week’s interest rate hike by the Bank of Canada (BoC). This rate hike came about following some impressive economic output and a strong run of data releases. Usually, a rate rise would boost the currency in question and with Canada’s economy seemingly outperforming that of its UK counterpart, why have we seen the Pound make further gains against the CAD?
The answer probably lies with the current concern surrounding the terms of the North American Free Trade Agreement (NAFTA). US President Donald Trump has been extremely vocal about his dissatisfaction with the current terms, feeling they do not benefit the US as they should.
With talks starting today, he has already threatened to pull out of the agreement, which if it were to happen would be extremely detrimental to the Canadian economy.
Whilst Canada’s global export of crude oil helps support their economy, their primary importers are the US. Therefore any shift in this trade relationship will no doubt have an impact, which is currently being factored into the CAD’s value, at least to some extent by investors.
Whilst Trump may struggle to convince Congress to pass any decision to leave NAFTA, the current uncertainty is weighing heavily on investors and as such the CAD is struggling to make an impact against the major currencies, including the Pound.
However, the current trend could be reversed at any time and considering the relative health of the Canadian economy, I would be tempted to remove the on-going risk factor and secure any short-term GBP/CAD positions whilst rates continue to trade above 1.70.
Thank you for reading my Canadian Dollar currency report, if you have any questions about an upcoming transfer please don't hesitate to get in touch on 014194 725 353 or email me here.
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