In this pound to Canadian dollar forecast we discuss the GBP/CAD exchange rate which has risen recently as weakness in the Canadian economy and a lower price of Oil all weighed on the Loonie dollar.
Economic news released this week showed that Inflation was slightly lower than expected, making it less likely the Bank of Canada will need to raise interest rates again so soon.
The Bank of Canada has been a little more cautious of late with the global economy struggling to make sense of the ongoing Trade Wars which are weighing on market sentiments. This has had a negative effect on the Canadian dollar for two reasons, one being the fact the BoC state they are concerned about trade and are therefore less likely to rush to hike interest rates. Two, being that the struggles on trade will negatively influence trade sentiments relating to the Canadian dollar. Being a commodity based currency, i.e. one whereby the economy relies on global trade and exports of commodities, the Canadian dollar is sensitive to news on global trade and sentiments.
Canada exports a wide range of raw materials globally, principally lumber and Oil. Any news on global trade coming under pressure can therefore negatively influence the Canadian currency.
Will the Canadian dollar weaken further
Looking forward as the market begins to wind down ahead of the Christmas season, the currency may well find itself under pressure as investors steer clear of the commodity based currency which is so sensitive to global news.
Investors might wish to sell off any Canadian dollar positions going into Christmas, in case Donald Trump makes a statement on trade around Christmas which might weaken the currency.
Whilst the same is true of the pound over the season too, as investors shy away from the politically weakened sterling, expectations are fairly low for either currency to perform particularly well.
I expect the GBP/CAD rate to remain over 1.70 going into the New Year, which is a great opportunity for buying Canadian dollar with pounds. Clients looking to buy CAD with GBP in the New Year need to weigh up which is likely to suffer more in 2019. For me, I would expect sterling to have a dismal start to 2019 as Brexit appears no closer to being resolved.
Please do contact me to learn more about my pound to Canadian dollar forecast. You can use the form below to send me a message directly.