Alan2005

It's going to hurt anyone who isn't earning CAD. Also anyone who exports stuff, especially to the US. Canadian goods now look expensive.

Deva

I enjoyed some of the highly predictable but mildly amusing Brit bashing in the comments.

adrianv

Stick or twist?

We'll be moving UK to Canada at the end of the month to buy a house around May-time. Right when we're likely to have a general election. My understanding of the analysis in this thread and other articles/opinions via Google (that bastion of financial advice!) is:

- One nugget gets us 1.53 loonies right now
- The previous (relative) highs of 1.7-ish and the following decline seemed to follow the similar decline in the Tories' opinion poll lead
- The £ may decline further against most currencies if there is a hung parliament... C$1.30 anyone?!
- The £ may rally if a Tory Govt gets in

William Hill's predictions today
- Tory majority 8/13
- No overall majority 6/4
- Labour majority 8/1 - wow that's pretty long!

Obviously the campaigning and predicting in earnest hasn't begun yet (likely tomorrow).

I got £23k to put down on a house:
1. Take 1.53 tomorrow and be done with it. The time spent agonising over exchange rates over the next 6 weeks is worth much more than money (packing, working etc!)
2. Hold out until after the general election (when I'll be on a course in Toronto). Even if the pound rallies to 1.6 that'll be an extra $1600 - which is many beers or a nicer car. Or if the pound tanks to even 1.45 that's $1800 less. I appreciate the currency swings may not be as large as that.
3. Use our line of credit (interest rate 3%) as "buffer" until the pound recovers (more than enough to cover my £23k).

What would you do? (I'm leaning towards option 1 cos I'm lazy) Play fantasy forex trading!

scottymallo

Personally I think the £ has bottomed out! Should head back towards the 1.70-1.80 mark as we head towards summer. People are making big money out of these crashes in currency. Now all the big traders will be buying the £ ready to make some easy money when it starts to rise. Positive new such as manufacturing sector in the UK growing at its fastest for 15 years will help.
This is my opinion anyway!

loser40

Hi adrianv,

Sods Law dictates that what ever you do will be wrong, so I'd bite the bullet and exchange £11.5k now and take a risk with the remainder.

I've not made things any easier for you have I, but that's because none of us has a crystal ball.

Hope things work out for you and the many others in the same situation.

Regards,

Mark.

wheatsheaf

no crystal ball..but...I hold the same view as Scottymallo. The canadian dollar is above it's weight and cannot hold the rest of the year. There is a silenced view that the canadian economy has skated on thin ice, which is now due to melt, and the loonie will drop like a rockies. Canadian financial institutions are "young" and will not be able to cope with a 'meltdown', compared to UK institutions which are strengthening daily and 'will be back'

Arty

Well fingers crossed,

Hobbess

I did option 3 towards the end of last year when the rate was around 1.7ish and I was was hoping for what I thought was a reasonable 1.85 by summertime. I figure I could afford the payments on a "cheap" credit line and still make money based on the 0.15 uptick. Obviously still waiting and no desire to bring it over quite yet. On the plus side been slowly paying off the credit line so not borrowing all the money that I would transfer.

I eagerly open this thread everytime a new message gets posted hoping that someone has some optimistic words of wisdom that will push the £ back to the heady days of $2... but that seems like a long way away.

JamesM

I think the current exchange rate already factors in a hung parliament. I would hold of moving your money. I have a similar amount and I agree that the Canadian economy is on thin ice with some very fudged economic debt data.

Alan2005

Not adding anything in particular, but this (and wheatsheafs/scottymallos posts) pretty much matches my view; the reporting of canada's economy is too positive and the UK's too negative. I'd definitely wait until a few months after the GE before doing anything.

mjwalker007

I hate to say this, as the high dollar is effecting most people, but there is no indication that this will alter in the near future.

Look at what as happened over the last couple of years !! If I here one other UK politician say that they saved the country by bailing out the banks, and that they had to do it as it was a world wide meltdown..............IT WASNT ! not one bank failed in Canada or came close to it. The Canadian financial institutions are more tightly regulated and prudently run than the UK and America......fact !

"Banking in Canada is widely considered the most efficient and safest banking system in the world,ranking as the world's soundest banking system according to a 2008 World Economic Forum report" ..........quoted from wikipedia !!


http://ca.news.yahoo.com/s/capress/1...economy_dollar

This thread goes on to say what the economists think about the high loonie....and comparing it to the US $, this time it may be here to say ..............who`s right and whos wrong ?? . The exchange rate is what it is, change it when it feels right or you have to and dont look at the rate again !! it will save you many sleepless nights worrying over something that you have no control over whatsoever !!

Alan2005

You are wrong of course - the western banking system has been bailed out en-mass; and Canadian banks were not excluded. ZIRP is a banking bailout.

Something you should consider; consumer debt in Canada is actually very high. In 2009 Canadian household debt was about $1.3 trillion (source), UK household debt was about £1.4 trillion (source). Given the relative size of the adult populations, Canadians owe quite a bit more to banks than brits (a fact that many on here think is the other way around). However Canadian banks are well run and wouldn't make bad loans would they?

It doesn't really affect me how the loonie moves as I transferred my cash years ago. In fact I my preference is for CAD to be strong because that's what I earn; however I try not to let affirmation bias and group think cloud my judgement.

You may be right in the short term as it is anticipated that Canadian interest rates will be raised and the UK's government will still be settling in. However the UK economy isn't going to get any worse and once the uncertainty over the election is out of the way I think we'll see an increase in the rate.

Either way, I can't really see USD/CAD staying at the levels it is for too long. If anything is going to stick it to the "recovery" in Canada then this is it.

mjwalker007

However there is a disctint difference between what you have mentioned and a specific bank having to be bailed out by the government, otherwise it would have gone under. This did happen to Northern Rock, and a few others were very close in the U.K.

The Canadian government did not have to do this with any specific bank in Canada. This isnt to say that Canadian banks are whiter than white, but they are definately closer regulated than that of their counterparts.

In 2007 when we came to canada, I dont think you could of got a mortgage with a 10% deposit without showing any form of income verification. i.e they just accepted the income that you wrote on the application. You could in the U.K !

Alan2005

Direct / indirect bailouts? I don't really see the difference - the result is the same. A transfer of cash from you and me to the banks; either through taxes or the devaluation of the cash in our pocket. Actually the latter is worse because the theft is compounded.

JamesM

The reason for the currency variance has to do with far more indicators than simply whether banks were bailed out or not. HSBC, a british bank, still has a higher net worth than probably the 3 largest Canadian banks put togethar. The reality is that of all the G7/G8 countries Canadian banks play the least significant role in global commerce and therefore are unlikely to get caught up in complex bundled debt derivatives (probably a good thing).

I agree that the demand for pounds may have dipped slightly due to the bail out- but other factors have played a significant part in the weak pound such as the very low interest rate, the very high national debt, the fall in house prices, the rise in unemployment etc.....alot of these would've happened without the banks being bailed out. Britain's situation has been laid bare for all.

Canada still faces many of the same economic challenges as the UK and I think lot's of things will start to play in the UK's favour in the next few month such as:

- The general election outcome and a decent debt paying plan
- Better economic growth data
- Decline in unemployment rises
- Confidence in the Euro slipping and the GBP becoming a safe haven outside of the eurozone.

I just can't see the future prospects for the GBP being any worse now and I cannot see any reasons for the Canadian dollar getting any stronger.