Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

Canadian Dollar strengthens following positive economic data

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The Canadian Dollar has surged during this afternoon’s trading after better than expected Gross Domestic Product data and employment or labour data showed a more positive picture of the economy in Canada following a drop off earlier in the year.

Canadian Gross Domestic Product data

The Gross Domestic product data jumped up to 0.2%, 0.1% more than was expected in September. This followed
-0.1% for August when it dipped into negative territory.

Currently the Canadian economy isn’t performing as well as it was during the second quarter, however it is still positive news for the economy and ahead of analysts expectations. The main reason for the jump was put down to household consumption picking up. This data has helped to strengthen the Canadian Dollar (CAD).

All in all, the CAD could be set for a very strong start to 2018. Stronger than expected economic performance will support the possibility for further interest rate hikes in 2018, which will now be surely on the mind of Stephen Poloz, the Governor of the Bank of Canada (BoC) following the risk to oil prices seemingly being adverted for now.

OPEC agreement leads to rise in Oil prices

An agreement was reached between OPEC (the Organization of the Petroleum Exporting Countries) to keep caps in place throughout 2018. Oil today has been strengthening throughout the day, reaching a two and half year high.

As a major exporter of oil, any positive news for oil prices usually helps to strengthen the Canadian Dollar. What is more interesting is that with the agreement due to run throughout 2018, the pressures from the global economy and in particular oil will have subsided, which leads to investors hoping for a few Canadian interest rates hikes in 2018, which has helped to strengthen the CAD throughout today. The opposite is of course also true, if hope of an interest rate hike dips the CAD will likely weaken.

OPEC meeting next week and the ramifications for CAD

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canadian oil rigThe major oil producing nations will meet next week to discuss to potentially put the final details into an agreement that will regulate the amount of oil being pumped into the market. There is a huge amount of scepticism surrounding the event as OPEC nations have never been able to come to a decision in the past.

Earlier this year the cost of a barrel of oil went through the floor as the output levels along with Iran being included into the market produced a huge overproduction. Since then there has been a stabilisation however some nations have enjoyed the race to the bottom essentially pricing out some producers. The Canadian Dollar is incredibly volatile when the oil markets move and the decision next week could have a major factor. The GBP/CAD rate has been low recently with the weakness faced by Sterling since Brexit. However moving forwards as Sterling regains lost ground, CAD weakness could help the rate back above 1.70.

Poor Retail Sales for September

This afternoon retails sales data for Canada came in 0.5% worse than expected showing there was no improvement from the previous month. The Canadian economy has struggled since the wildfires at the start of the year and should there be a deduction in consumer spending this could affect inflation levels.

Trump Effect

Over the next few months there is no doubt that Canadian policy makers will be keeping an eye on Donald Trump as he looks to change the path for the US. There has been so much focus on what trade deals Trump will look to renegotiate the future strength of the Canadian Dollar may soon be under threat

That being said, Trump plans to build a 1900km oil pipe connecting Alberta’s rich oil supplies to US soil, known as the Keystone XL pipeline, this could in fact benefit the Canadian economy if the plans go ahead.

Oil prices remain on the lower end of $50 with further advances likely if an OPEC deal can be achieved. Personally I would not get any hopes up given the difficulties faced between Iran and Saudi Arabia, who have been unwilling to cooperate with one another. If OPEC are able to arrange an all-round agreement then oil prices could begin to mend from their recent lows. This in turn would likely benefit the Canadian Dollar, and coupled with Brexit concerns rates may reverse from their recent highs.

Canadian Dollar buyers may benefit from taking advantage of the recent rally in Sterling’s favour, as I envisage the Brexit scenario to get much more complicated as we approach 2017.

The Canadian Dollar soars as oil prices hit a 52 week high

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The Canadian Dollar is currently the top performing G10 currency as oil prices have been going from strength to strength over the past couple of days.

With the Loonie (CAD) being a commodity based currency that’s value is heavily influenced by oil prices due to oil being Canada’s main export, the currency has really been boosted by the latest OPEC agreement and the Canadian Dollar’s strength could well continue from here if we’re to see oil continue to climb as it currently is.

The news behind the oil price hitting its highest point ($53 per barrel) over the past year is because Russian President, Vladimir Putin has announced that he’s on board with OPEC’s latest plans to reduce oil production, which is likely to continue to increase the value of oil.

This good news for the Canadian Dollar has coincided with increased pressure on the Pound. After it was announced that the UK will begin the process of leaving the EU in the early months of next year, the Pound has continued to come under pressure and with little to no economic announcements out of the UK this week, I expect the current trend of a weakening GBP/CAD pair to continue.

There has been talk within the UK of a further interest rate cut and should this occur, I would expect to see further Sterling weakness, and likewise with any further talk of Quantitative Easing (QE) we can expect to see the Pound soften off of the back of these types of announcements, which are generally Sterling negative.

Those that plan to convert their Canadian Dollars into Pounds are currently looking at the best levels in over 3 years, and I think what would be most likely to scupper these gains would be a change of sentiment towards the UK and therefore, the Pound. The fundamentals out of the UK are currently quite good so I personally believe the Pound is currently trading below its fair value.

GBPCAD falls on Brexit uncertainty and higher oil prices

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  • GBPCAD falls on Brexit fears and oil price increase
  • Exchange rates down 2.5 cents since the weekend
  • Further falls likely with Brexit uncertainty the main driver

Canadian dollarSterling to Canadian Dollar exchange rates have taken a hit since the weekend. Theresa May’s announcement regarding the timing of Article 50 has resulted in Sterling weakness and fresh uncertainty for the UK. Much of the weakness is likely due to a lack of Brexit plans and thus a drop off in investment.

Theresa May remains vague about her plans for the UK which has raised questions for those working and operating within the financial sector.

GBPCAD is now trending near its lows since the Brexit vote.

Oil prices increase on OPEC agreements

The uptake in oil prices has recently been fuelled by the recent OPEC meeting with many of its member agreeing on a production limit. Whilst this has positive implications for CAD investors remain sceptical given the inability to arrange a production freeze in the past.

Saudi Arabia are unlikely to stick to any agreement if rival Iran doesn’t, and Russia’s last agreement with OPEC back in 2001 never actually materialised.

Whilst oil prices have rebounded in the last week I am not expecting this rebound to last. GBPCAD will likely continue to fall due to Brexit uncertainty as we approach 2017.

Economic data on Friday could cause CAD volatility

Friday’s unemployment rate and Ivey PMI could cause CAD weakness, with the recent fall in oil prices business conditions may have taken a hit. However if you do need to buy CAD in the very near future I would do so sooner rather than later as the general devaluation of the Pound as a result of Brexit will likely be the main cause of further downfalls.

Today’s OPEC discussions and the impact on CAD

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oil price hikeGBPCAD could be one of the few currencies to strengthen following the Brexit vote, caused in most part by the falling price of the barrel of oil. OPEC met today with 14 of its oil producing nations to discuss a production freeze in attempt to stabilise the price of oil.

OPEC have tried on many occasions to make ends meet but have failed to negotiate a reasonably agreement amongst its oil producing members. Saudi Arabia have offered to reduce its numbers if rival Iran agrees, which looks unlikely given their recent sanction relief.

Russia is on course for pumping 11.1 million barrels of oil a day into the market, compared with 10.7 million barrels recorded in August. They are not looking to freeze production but simply implement a ‘cap’ on existing numbers. There does not appear to be any signs that OPEC are able to agree a production freeze at today’s meeting.

But even if nations are able to agree on a production freeze, its likely discussions will continue with a final decision likely in the months ahead. This leaves the price of oil at the lower end for some time, which will cripple the Canadian Dollar as we approach 2017.

Sterling likely to continue its advances against CAD

GBPCAD remains above 1.70 and has gained 3.5 cents since the lows of this week, with the price of oil likely to remain low, the implications for the Canadian economy could be significant. Whilst it is unlikely that GBPCAD exchange rates will return to its pre-Brexit levels anytime soon, further advances towards 1.75 possibly 1.80 are plausible.

If you have Canadian Dollars to sell, you may wish to look at doing so sooner rather than later. The strength of the Canadian Dollar is closely linked to the price of oil and could spell further gains for Sterling against the Loonie.