Foreign Currency Exchange

The Canadian dollar fell against most major currencies towards the end of last week, after recent data pointed to a stumbling economy and the market anticipated the next move the Bank of Canada will make on interest rates will be a cut.

The Canadian economy has been hard hit by the slowdown in the United States, where it sends over three-quarters of its exports. American consumers have been struggling under the weight of a housing slump and tight-credit. Reports suggest that the Canadian economy shrank by 0.3% in the first quarter and that the figure is expected to have been followed by a further loss of 0.1% since.
“The Canadian dollar remains under pressure and I think it's in large part due to the soft run of Canadian data, particularly the GDP data, and the growth outlook for Canada is softening," said Fergal Smith, managing market strategist at Action Economics.

The softening outlook for Canadian growth has led investors to start pricing in an interest rate cut by the Bank of Canada before the end of the year. Until recently, rising inflation had investors betting the next move by the Bank of Canada would be a hike.

The Loonie outlook, has the potential in the short term to show some bias towards Sterling, which would be worth keeping a close eye on for those with an upcoming Canadian Dollar purchase.