We are still close to a 6 year high against the Canadian Dollar. In January the rates above 1.93 were an anomaly from market fears concerning rapidly falling oil prices and the dire situation for Canadian unemployment.
At the start of May rates had fallen due to an expected hung parliament in the UK; these fears were proved to be grossly exaggerated. We are now in a period of recovery for GBP-CAD rates, but can they advance any further? The long term view seems to find the Canadian economy moving in a positive direction, which means strength for the Canadian Dollar and less attractive GBP-CAD exchange rates to accept.
Canadian unemployment is falling rapidly. Canada added 6 times as many jobs in May than economists had predicted in the biggest manufacturing gain in four years. This supports Bank of Canada Governor Stephen Poloz’s opinion that momentum is shifting to non-energy companies as the oil industry cuts investment and jobs. Economies diversify in times of trouble, Canada can no longer rely on oil to govern the strength of its economy, particularly it has had to endure record low trade deficits for the entire year.
Increased jobs increases consumer spending. Data released this morning reflects this – with an extra 17,000 new homes for families expected by the end of the year than previously forecasted. This puts Canada’s total up to 201.7k homes for the year, a target held by the UK, but one we are felling well short of even though we have twice the population of Canada. Much of what has been happening in the EU recently (pumping money into the economy) has been geared towards stimulating spending by making the value of their currency lessen – decreasing the incentive to save. Canada seems to be on the same track to recovery, and without the political situation in Greece to hold them back
But the politics of the country is still extremely divisive. The upcoming elections have the three main parties almost in a three-way tie – with 57% of the population supporting a coalition. The messy negotiations that worried markets concerning the British election may now be at Canada’s door as well.
So between now and General Election in October, the strength of the Canadian dollar will be governed by a mixture of economic recovery and political confrontation. Any sudden increase in oil prices will immediately pump value into the CAD, which is why it is one of the more volatile currencies. So exchange rates must be monitored daily, with news from numerous sources affecting demand on the markets, and as a result the direction of the rates in both the short-and long term.
Those with a Canadain Dollar requirement can contact me on 01494 787 478 and ask for Joshua. Or email me on [email protected] for tailored advice on your personal situation. Due to the volatility of this particular currency, options to peg rates for up to 12 months are more popular, especially since the rates are currently sitting so close to historic highs. Why risk it stretching an extra cent in your favour, when it is more likely it will more 6 cents against it?
Tomorrow inflation report hearings for the UK economy will be published. The UK has endured the lowest levels of inflation since records began in recent months. 1.90 was reached today in trading for the Canadian Dollar, but I cannot see it lasting for long. Expect Sterling weakness tomorrow and rates to dip into the high 1.80’s.