The Canadian dollar has performed well over the past week against sterling, moving back below 1.70 following a run of positive economic data.
Positive outlook for the Canadian dollar
The pair currently trading just 1.69, with the CAD cementing these gains at the end of last week following positive employment data. This positive run of economic data releases has justified the Bank of Canada’s recent optimism, with the loonie seemingly being backed by investors as a result of this positive outlook.
With Unemployment in Canada hitting fresh lows at 5.4% and an increase in customer spending anticipated, the general mood around the Canadian economy remains positive. Whilst the current economic outlook remains bullish, there are some potentially negative variables for those clients holding the CAD to consider.
Continuing US China trade war could negatively impact the Canadian dollar
With the US on-going trade dispute with China showing no signs of an amicable conclusion anytime soon, the anticipation is that both the US & global markets will start to show signs of a slowdown this year. The knock-on effect of this is likely to be negative for the Canadian economy, which relies heavily on a steady demand for its exports to the US, due its heavy trade links with its closest neighbour.
Due its standing as a commodity-based currency the CAD also relies on global growth to drive the import/export markets, which is an essential part of its export driven economy. The is anticipation that the US Fed will have to cut interest rates later this year and this in turn means the Bank of Canada are likely to follow suit in early 2020.
With oil prices remaining steady and the on-going uncertainty surround the UK economy due to Brexit, those clients holding CAD may have been given a window of opportunity over the coming months to buy GBP at an advantageous level.
If you would like to learn more about factors affecting current exchange rates, please feel free to contact me directly using the form below.