The Canadian dollar is likely to be in for a volatile week as the key interest rate decision from the Bank of Canada on Wednesday fast approaches. There is a good chance the central bank will look to raise interest rates by 0.5% to 1.25% which will make this the third interest rate hike since summer 2017. The Bank of Canada raised interest rates twice last year and surprised the markets with the first hike in July on the back of stronger data which permitted the central bank to follow in the US’s footsteps in terms of monetary tightening.
Clients looking to buy or sell Canadian dollars are likely to see volatility on Wednesday depending on the outcome. A rate hike is likely to see the dollar strengthen although the market reaction may not be as strong as some are hoping for. The prospect of a rate hike has already begun to be priced into the market although my view is that the dollar should still strengthen if there is a hike. Those looking to move sell Canadian dollars for pounds or Euros could be –presented with a good opportunity to convert following the announcement so it may be worth positioning yourself ready if there is a positive market reaction.
The risk of course is that if the Bank of Canada don’t raise rates then the dollar is likely to weaken as the markets would have got ahead of themselves. Clients looking to buy Canadian dollars with pounds could see a jump higher. Rates for GBP CAD are currently sitting at 1.7130 whilst rates for CAD EUR are at 0.6565.
For anyone with a pending requirement then please feel free to get in touch with me James to discuss your specific requirement and how we can help you with the conversion and transfer. You can email me at [email protected]