Foreign Currency Exchange

The Canadian Dollar continued to show strength throughout last week, with the rate moving to a low of 1.9208 after weak GDP figures on Friday and no further upward movement in commodity prices. Housing data releases have also shown signs of a mortgage crisis in Canada.

Disappointing growth figures will undoubtedly be a concern to the Bank of Canada who are expected to keep interest rates on hold this week, with the next change expected to be a cut. However, the BoC have much more flexibility with their economic policy than the Bank of England due to their low rate of inflation.

We anticipate the GBP/CAD cross will remain range bound over the short term, with the CAD losing some of its recent gains on the pound. In the medium term, both the UK and Canadian economies are expected to struggle, with neither being strong enough to exert any significant pressure over the other.