GBP/CAD rates have almost hit 8 year highs.
This is entirely due to market distortion following the continuously surprises coming out from the Chinese economy.
The saga has been going on for a few weeks now, originally the poor news helped the Canadian Dollar compared to its competitors. The Canadian Dollar is not closely linked with China as a trading partner, as such the USD and the Pound were hit harder as both their abilities to raise interest rates in the near future came into question.
But the worsening news out of China truly started to change forecasts for global demand in the future. The stock markets have been losing value rapidly – London markets opened 3% lower as an example when trading began in the UK and futures on oil have been put under further pressure. Traditionally when stocks are under-performing investors will pull out their capital into safe-haven currencies. As such the current weakness for the Canadian Dollar on the rates is not really weakness itself but rather artificial strength in its currency pairings.
This has boosted the USD/CAD to an 11-year high and GBP/CAD close behind near 8.
This market movement is a gift to CAD buyers and I feel it’s likely to keep giving this week. Due to the lack of transparency in the Chinese economy, it is very difficult to know whether more news will emerge in the short-term before stock markets stabilize. In the mean-time it seems the Canadian Dollar is set to lose out on potential strength while investors scramble for cover to weather out the storm with their clients.
Email me on firstname.lastname@example.org to discuss how to ride any moves in your favour over the next week or more depending on how this situation develops. Those looking to sell CAD in the short-term may wish to bite the bullet now and peg GBP/CAD or USD/CAD in case the situation continues to deteriorate.