Will the Canadian Dollar continue to strengthen?
Despite Sterling recovering somewhat against all major currency pairs this week, its recovery against the Loonie (Canadian Dollar) has been limited owing to CAD strength. To put the Canadian Dollar’s performance into perspective, the currency has rallied by more than 13% against the US Dollar since May, and during August it’s been the best performer of all the G10 and G20 currencies.
Those hoping for a weaker Loonie should be aware that during an interview late on Tuesday the countries Finance Minister, Bill Morneau told Reuters that the rise is just ‘a reflection of the country’s economic strengths’.
With the Canadian economy being heavily export driven many may have hoped that the Bank of Canada would have looked to weaken the currency in order to keep exports competitive, but that doesn’t appear to be a concern of theirs at the moment.
Aside from these positive comments alleviating concerns of an overvalued and uncompetitive Loonie, the currency has been further boosted by strengthening oil prices after the International Energy Agency (IEA) mentioned that the global oil surplus is beginning to shrink due to strong demand as well as an output drop from major producers.
Economic data to watch next week out of Canada
There are no major economic releases out of Canada specifically this week, so I expect the GBP/CAD to continue to be driven by sentiment and the data out of the UK.
Next Friday on the other hand is scheduled to be busy as inflation and retail sales data is due out in the afternoon (2.30pm UK time) as Canadian markets open.
If you’re planning a short-term currency requirement involving the Loonie, it’s worth making us aware now as planning around next week’s key releases may be a worthwhile option in case the figures shock the markets, and CAD exchange rates change from their current levels.