From briefly hitting 1.95 on Friday, GBP/CAD rates have fallen to 1.93 in a single morning of trading and seem to still be falling. There are a few reasons why, but those who have a Canadian Dollar requirement over the next few months, should consider their options. It would take quite a monumental data release like the one last week to shift rates up to 1.95 again. As we have seen today it is difficult for the rates to even stay at that level once they are reached.
The reason why the rates have fallen down are two-fold. Firstly, as the above suggests, markets are simply ‘balancing out’. When rates suddenly jump 4 cents in a week and reach a 7 year high, it is difficult for investors to pass up the opportunity to buy cheaply. They buy CAD in hoardes, and in doing so, raise the value of the Canadian Dollar due to increased demand.
Secondly, markets have calmed down after the initial hysteria. As the post below notes – markets were initially panicking that retail sales were down, and less people were purchasing, but at the same time prices were still increasing. Over the weekend, investors have realised that few countries have inflation rates at 2.2% like Canada does. The UK is currently facing record lows, and the Eurozone is just keeping out of outright deflation (and has been in this position for a few months). The traditional consensus is that having inflation at 2% is the perfect balance between encouraging the economy to spend without making products unaffordable. So while the retail sector seems to be flagging, other parts of the economy must be healthy, healthier than other western nations. So in essence, the rates on Friday were the result of a market over-reaction, which is why many are comfortable holding onto Canadian Dollars once again.
We started off last week at 1.91, and we are now at 1.93. While the rates are still artificially high, I would encourage anyone who is considering purchasing Canadian Dollars to move now. You do not have to wait until you require an exchange. Rates can be pegged quite easily so that you do not have to leave yourself at the mercy of the markets and hope the rates are still this cheap when your time comes. Contact me on [email protected] to discuss how to secure these rates and budget more effectively over the next few months.