The following report discusses factors that could affect the strength of the Canadian Dollar in the short term.

Loonie struggles under snap election announcement

Last week saw a poor performance for CAD as GBP/CAD gained more than 3.5% over just 4 days, the highest gain of all G10 GBP pairings over the period. Our well-informed clients could have earned an extra $10,125 on a £150,000 by trading at the highs. The main reason for the GBP rally was down to Theresa May’s shock announcement of a snap election on Tuesday 18th May, which saw GBP/CAD climb by almost 5 cents in just one trading day.

A strong equity market gives reasons for optimism

In my opinion however CAD will claw back the vast losses made last week, the main reason for this can be put down to the acquisition of WS Atkins (British engineering firm, with a revenue of £1.86bn) by SNC-Lavalin in a deal valued at more than £2.1bn. When there is an acquisition of this size it signifies a very strong equity market in the country making the acquisition. In turn this often attracts a large volume of inbound foreign capital (capital inflows) into the economy. According to Bloomberg the volume of GBP/CAD traded on Thursday 20th April exceeded $600bn, vastly in contrast to the daily average of just $12bn.

Economic data releases

Whilst economic data this week is light this week, with only Gross Domestic Product released for February on Friday at 12:30pm it will be important to watch how the possible American Government shutdown situation unfolds as discussed in the USD section of my report. The USA is the single biggest export destination for Canadian Exports (74% or $331bn last year), therefore if it remains unresolved it could spell weakness for CAD later this week.

If you have a CAD purchase requirement it may be wise to get in touch with your experienced personal broker here at Foreign Currency Direct today and lock in the current rates of exchange sitting at close to 7 month highs for a small deposit through the use of a forward contract. Call us on 01494 725 353 to learn more.

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.

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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.