This report looks at a number of factors that are impacting the Canadian Dollar, such as crude oil prices and Trump's trade tariffs on Canadian Lumber. The below table highlights GBP/CAD exchange rate movements for the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
In recent weeks the pound has gained 11 cents against the Canadian dollar making a 200,000 Canadian dollar purchase £7,400 cheaper. The shift in sentiment can be put down to sterling strength and Canadian dollar weakness. As stated in the sterling section of this report the pound has had a good run off the back of UK Prime Minister Theresa May calling the snap election on the 18th April.
The Loonie (Canadian dollar) has been devaluing in recent weeks due to three main reasons. Firstly the price of crude oil remains low and as crude oil is Canada's largest export this has a negative impact on Canadian dollar exchange rates. Secondly Donald Trump's views are putting pressure on the North American Free trade agreement. He believes Canada is illegally subsiding its timber industry alongside dairy farmers north of the border constantly undercutting those that are south. Thirdly there is a clear difference in monetary policy decisions between the Federal Reserve and the Bank of Canada. The Bank of Canada remain dovish and there is no sign that an interest rate hike is on the horizon where as the Fed have raised interest rates this year and plan to hike again in the near future.
Looking ahead the tides could change for client’s involved with the Canadian dollar. A survey by Reuters with 50 foreign exchange strategists showed, the expectation was that the Canadian dollar would strengthen throughout the next month and year. The economists believe that a pick up in the domestic economy is on the horizon which would in turn force the Bank of Canada to raise interest rates.
My personal view is that Donald Trump will continue to honour the North America free trade agreement and overtime this will take pressure off the Canadian dollar. Furthermore with pressure released you would expect the Bank of Canada to follow the Fed and begin to raise interest rates which would therefore lead to Canadian dollar strength. Therefore if you need to purchase Canadian dollars with sterling medium term, the 11 cent spike in the market this month may be worth taking advantage of.
Clients wishing to proceed with a Canadian Dollar transfer should in any event, detail their requirements to a member of our team so we can assist in creating a plan of action for you. A number of factors will influence CAD in the short term so please do get in touch on 01494 725353 if you'd like to talk to an expert.
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