The ongoing issue of the NAFTA agreement, and whether or not a new deal can be struck is having a profound affect on the Loonie, which as a commodity based currency relies heavily on exports. This CAD report discussed how this could affect the Canadian Dollar in the coming months. The table below shows the difference in Canadian Dollars you could have achieved when buying £200,000.00 during the high and low points of the past 5 months.
|Currency Pair||% Change||Difference on £200,000|
The Canadian Dollar failed once again to manufacture a fightback against the Pound as yesterday’s poor manufacturing PMI data reflected a general lack of confidence in Canadian growth at present, as a result of the US continuing to discredit trade between the nations.
With the Bank of Canada’s interest rate decision set for next week, positive international trade data would normally reinforce the market’s view that the Monetary policy committee would hint positively to near term interest rate hikes, thus strengthening the currency in question.
Despite current account figures from statistics Canada showing a drop in the trade balance deficit from the previous -$18.59bn to -$16.35bn, any moves back below 1.76 from the Loonie were quickly stopped in their tracks as the RBC’s Manufacturing PMI reading came out at 55.6 down from 55.9.
This was further compounded by US president Trump’s promise to raise tariffs on imported steel and aluminium in a bid to promote domestic growth and potentially limiting Canadian produce onto the US market.
This follows on from the constant belittling of the North American trade agreement which has left many investors to worry for Canada’s growth forecasts, particularly as demand for the country’s main export Oil, continues to waver.
With so much uncertainty surrounding the Canadian economy at present, sitting back and holding back for further falls from the Loonie is a tempting option.
Today’s official GDP figures for December will be closely watched by investors. For the BoC to commit to the interest rate hikes this year as planned, despite the NAFTA agreement coming into doubt, the GDP reading has to come out strong.
A recent Reuters poll suggested that despite all the uncertainty, 2 interest rate hikes remain on the cards, with an 80% chance the next one being in May. If the GDP reading comes out higher than expected, the markets may factor in the potential of a more positive vibe at the next MPC meeting on Wednesday which should draw investor confidence back towards the Loonie making it more expensive to buy.
The release is due for early this afternoon. If you are looking to buy Canadian Dollars it may pay to get in touch this morning to limit your exposure.
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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