The GBP/CAD rate has been rather volatile as we end 2018, losing ground as the price of Oil struggles and sterling feels the force of the general market dissatisfaction over Brexit. Expectations for the pound and Canadian dollar could be rather mixed in 2019, as both currencies struggle under the weight of the various challenges.
For the UK it is clear Brexit is a cause of market displeasure, not knowing what the final outcome will be from the UK’s withdrawal from its biggest trading partner. For the Canadian dollar the outlook is trickier to explain but one word does it reasonably well, Trump.
The concerns over the Trade Wars and also the US economy’s performance might well weigh on the Canadian dollar further in the future. A prime example of the concern stems from the fact Canada is a commodity based economy, exporting raw materials to the global economy.
A key factor in driving attitudes towards the Canadian economy is the price of Oil and also the economic performance of its trading partners. Its biggest trading partner is the US and whilst their economy is performing well, many are questioning whether the US economy has peaked.
With the Trade War concerns weighing on global sentiments and attitudes to risk, investors are concerned about the negative effect on the Canadian economy. Investors feel there is now less chance of the Bank of Canada raising interest rates, which would put yet further pressure on the Canadian currency.
Overall, there is a belief that 2019 will contain more problems on Trade Wars and see the US economy struggling under the pressure of Trump’s politics and policies. The falling price of Oil too is weighing on sentiment so for me it all comes down to the pound.
I think the Loonie dollar is destined to be the weaker, the performance of the pound will hinge largely on what happens in the UK parliament in the week commencing the 14th January. I believe Mrs May will somehow get her deal through, this will see the pound rise. However, there is clearly a very real chance the deal will not get through which would see sterling lose value very quickly.
2019 is shaping up to be a very volatile time on the rates, if you have a position to consider buying or selling the pound then making plans sooner than later is sensible. A quick chat with our expert team can help provide some insight and news as to the best strategy to take in the future.
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