Canadian economy performs despite NAFTA uncertainty

Canadian Dollar Suffers Seven-Week Low Following the Spread of the Coronavirus

GBP/CAD – The recent Bank of Canada (BOC) rate hike bodes well for the Canadian Dollar. This is even though the North American Free Trade Agreement (NAFTA) is still yet to be agreed upon.

The recent interest rate hike from 1.25% to 1.5% was justified by a host of positive economic data. This was the fourth rate hike from the BOC in a year and they could be set to continue.

The BOC have stated they believe the Canadian economy will expand by 2% a year on average between 2018-2020. It was mentioned that current tariffs on aluminium and steel would only have minor effects on inflation and growth.

Inflation is predicted to rise to 2.5% before falling to around 2% in the second half of 2019.

Canada is benefiting from high oil prices and the current strength of the US economy.

On the UK front, things are not so good. Sterling is being held back due to the lack of clarity surrounding Brexit. The resignations of David Davis and Boris Johnson do not help the matter and there are rumours there could be a leadership challenge.

One of the key factors to effect currency is political uncertainty, a leadership challenge would no doubt cause the pound further damage.

The current Brexit proposal is flawed. It means there would have to be negotiations regarding the UK financial sector and the equivalence regime. Equivalence basically gives UK businesses limited access to the EU for a specific period of time which Brussels can also revoke. This will not sit well with large organisations reliant on trade with the EU.

Paris and Berlin will also be advising the Banks to move to their cities in an attempt to gain a huge volume of tax revenue. If this is the intention expect negotiations to be problematic. This has the potential to weaken Sterling.

If you have a requirement buying CAD short term I would suggest moving in the 1.74s. For more information on factors that are likely to impact GBPCAD rates feel free to get in touch on 01494 725 353 or email me here.