Naturally, the pound has seen considerable volatility against the Loonie since the beginning of the week. With the build up to yesterday’s vote bouncing the pairing between the 1.74 to 1.77 interbank range, presenting 2019 highs for Canadian dollar buyers to capitalise on.
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It is quite possible that this will continue today with investors likely to follow political sentiment (in the UK), taking most of the control out of the commodity based currencies like the Canadian dollar.
Having said that, depending on how the next phase of votes go, there could well be potential for the Loonie to strengthen as the week goes on, particularly if the uncertainty from the potential of a Brexit No-deal begins to take hold once more.
Most of the scope for Canadian dollar support looks set to come from tomorrow’s new housing data. Property prices on new builds in Canada have registered a consistent drop since 2017, but the numbers have been beginning to stabilise in recent months.
This could well be taken by the markets as yet another reason to justify optimism around the Canadian economy, with the potential for more interest rate hikes from the Bank of Canada (BoC) still being peddled in a time when most Central Banks look like dropping. This may well prove to be a precursor to long term Canadian dollar strength, making it more expensive as time goes on.
For those holding Canadian dollars short term, it is worth considering how the Loonie has been performing outside of the Brexit parameters. The CAD has remained fairly range bound, making marginal gains against both the dollar and the euro which suggests the markets have been buying into the Bank of Canada’s slight optimism too, whilst being all the more cautious of global economic conditions.
Reasons for optimism include renewed investment from the Government of up to $10,000,000 to improve the jobs market sector and facilitate foreign talents' access to Canadian jobs, indicating a certain level of confidence that sustained growth is still reachable.
This follows on from Statistics Canada’s labour force survey for February showing a jump of 0.3% and the Organization of the Petroleum Exporting Countries (OPEC) confirming any cuts to Oil supply are unlikely to be made before June, helping to prop Canada’s main export price up and providing a base line of support for the Loonie.
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