The value of the GBPCAD has been very changeable over the last 30 days with a swing of 5 cents within the last fortnight. The reason for this changeable level has come from ever developing environments both in the UK in Canada. The report below goes into further detail about the reasons behind this volatile period for the Canadian Dollar. The table below shows the vast range of exchange rates during the past month between Sterling and the Canadian Dollar, when selling £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
In the UK there has been mixed data releases and updates on Brexit negotiations impacting the UK Pounds value. In Canada domestic data has also been varied but we have seen trade talks and concerns over oil prices impacts its value.
Last week Canadian data included the all-important jobless market update. This showed a much improved job creation figure with nearly 32,000 people taking new jobs in June, up from the 7,500 contraction in May. However, the overall unemployment rate for the entirety of the country increased surprisingly from 5.8% to 6%. This had a negative impact on the Canadian dollar making it cheaper to buy as it suggests that their economy is struggling but also reduces the possibility that the Bank of Canada (BOC) will raise interest rates. An Interest rate hike, or the possibility of one, increased the demand for the currency in question as investor move into the currency to take advantage of the improvement of returns.
This jobless data comes just days before the BOC's next meeting when any change in forecasts and policies can be announced.
Even with the increase in unemployment the whole economy in Canada has been improving and inflation, which is the traditional driver for an interest rate change, now sits at 1.6%. Generally the market has been expecting a further hike of interest rates at this meeting on Wednesday which would be the fourth time in the last 12 months.
This could potentially take their interest rates up from the current level of 1.25% to 1.5%, well above that of the UK's 0.5%.
There is however an outside chance that they will decide to not raise interest rates which could in turn make it much cheaper to buy. This I think to be the least likely outcome but a hike could potentially be delayed as a result of the uncertainty Canada faces over the fate of the North American Free Trade Agreement (NAFTA). As the US is currently re-negotiating this trade agreement along with developing 'trade wars' with other parts of the globe, concerns are mounting that there could be further deterioration in talks with the US which could hinder the Canadians economic future.
If you have a Canadian Dollar trade to look selling Pounds I think there is more risk than opportunity and would be considering either to hedge or take the risk out before this meeting on Wednesday. Especially as even if things do deteriorate in Canada and the NAFTA agreement, I still believe that the BOC will be raising interest rates more steadily than the BOE over the coming 6 months.
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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