Over the last 5 weeks the pound has gradually declined against the Canadian dollar. Mid-market exchange rates on the 6th May were trading as high as 1.7725 and currently mid-market exchange rates have dropped to 1.689. To put this into monetary value a £200,000 transfer into Canadian dollars today compared to 5 weeks ago generates clients CAD$16,700 less.
Boris secures first round victory in Conservative leadership contest
The departure of Theresa May and the mess in the UK which is Brexit, is the reason why the pound has declined so heavily and upcoming pound to Canadian dollar forecasts I believe will be heavily influenced by the next Prime Minister of the UK. After the first round of voting yesterday Boris Johnson came out on top, receiving more than a third of the result.
Earlier in the week MPs voted against given back the commons to MPs if a new Prime Minister went down the route of crashing the UK out of the EU. Boris Johnson has made it clear that this isn’t his intention however the important fact is that Article50 has been triggered therefore the UK could leave by default come the end of October.
My personal view is that Boris Johnson will become the next Prime Minister, but a change in leadership will not change the EU’s approach. I don’t expect the EU to reopen the negotiations therefore I expect it’s going to be a tough summer for the pound. In addition, the Canadian dollar could benefit from the US cutting interest rates in the upcoming months. The Fed appear to be undecided on their next move and a cut could benefit the commodity based currency.
For clients that are buying Canadian dollars with sterling, the big events look like they could have a negative impact on the pound and a positive impact on the Canadian dollar. Therefore, if you are buying Canadian dollars with pounds this summer buying upfront and not gambling on Brexit seems like a sensible option. For more information on how Brexit could impact your currency exchange feel free to fill in the form below.