Foreign Currency Exchange

The Loonie strengthened significantly against the Pound last week moving from 1.95 down to a low of 1.84 following Thursday’s rate announcement from the Bank of England. This is still a turbulent time for commodity based economies such as Canada, thus we are seeing significant risk aversion from hedge fund managers liquidating their vulnerable assets and currencies, such as the CAD, in favour of safe haven cash investments in US Dollars or Swiss Francs.

The only significant data from Canada this week is the Merchandise Trade balance, effectively the nation’s trade balance figure for manufactured goods, however as the report is for the month of September, its impact will be minimal due to the volatile conditions the Canadian economy has experienced since.

Over the next week, we expect the GBP/CAD cross to be dominated by Sterling weakness, meaning the CAD is likely to remain rangebound between 1.80 and 1.90.