Canadian Dollar continues to strengthen against the Pound
The Canadian dollar has had a very strong run recently against the pound. An increase in Canadian retail sales on Friday showed slightly lower than expected figures. The data showed a 0.1% growth in April compared to March driven by more oil sales. It was slightly lower than expected but the figure for March was also revised higher.
What is driving the Canadian Dollar rate?
The Canadian dollar has also been strengthening as there is a strong possibility that US Federal Reserve are considering an interest rate cut. Canada’s inflation levels are now the highest in seven months and oil prices have also been rising recently. As Canada is heavily reliant on oil any increase in the value of the commodity will often have a big effect on the Canadian dollar.
The price of oil has also been rising owing to the global tensions at the moment. Fears are increasing that the US may look to heighten their presence in Iran after an unmanned drone was shot down last week. As the Middle East is responsible for over 20% of the world’s oil production then any disruption will often lead to an increase in the value of oil.
Leadership election causes problems for Sterling
In the meantime, turning the focus back to the UK and we are in the midst of a leadership election. Currently Boris Johnson and Jeremy Hunt are battling it out to become the next Tory Prime Minister. Johnson is the clear favourite at the moment with just four weeks to go. However, we have seen in history that the leading candidate at this stage may not be the victor. Jeremy Hunt has urged Boris to face up to the media and face him in a televised debate this week.
Johnson has claimed of the 31st October deadline that ‘this time we are not going to bottle it. We are not going to fail.’ Boris is clearly in favour of trying to leave the European Union by the end of October. However, as we have seen he will have a difficult task in getting the house of Commons to agree to the EU Withdrawal Bill. This is why we have seen the pound come under pressure against the Canadian dollar and I think we will see further losses still to come.
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