Sterling has had a steady climb against CAD over the last few weeks; however this has slowed in the last few days. With the likelihood of a FED interest rate raise before the New Year, this trend could be set to continue.
Whilst commodity currencies tend to have more favourable interest rates, their risk potentials make them less attractive for long term investment. The US Dollar on the other hand, which is seen as a safe currency could be subject to an interest rate decision in the near future making it an even more attractive prospect. The FED which was expected to raise rates previously looks likely to complete the hike by the end of the year and this could massively strengthen the USD.
This could have an adverse effect on the CAD both through making the US a potentially more attractive place to invest, but also making Canada’s main trading partner more expensive. If the CAD weakens and the USD directly strengthens then buyers of US goods would suffer, however US buyers would potentially purchase more Canadian goods.
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