Re: Exchange rate
 

Rates are certainly going to tumble in the UK...JP Morgan and Citibank are calling for 4.25% by year end (currently 5.5%). I actually have a sneaky feeling we see a cut on Thursday. The markets are very volatile with low volume in front of that and the decision from the European Central Bank the same day.

Chris

Re: Exchange rate
 

i spoke with money corp today , he thinks we may not see a cut on thursday but expect another couple before summer , either way its not good.

Re: Exchange rate
 

I am not so sure, the UK economy has been showing signs of following the US nose first into recession, every bit of data from the UK seems to be terrible. Up until now the Canadian economy has weathered the storm brilliantly, the PMI number last week was the first sign of trouble on the horizon. Most financial institution have dramatic rate cuts from BoE already priced into their plans, the possibility of Dodge and the Bank of Canada following suit has suddenly appeared on the radar.

What i am trying to say is everyone is expecting the worst from the UK the only surprises really can be good ones. Whilst Canada is just starting to wave that red flag, things can get so much worse here. Therefore, i see a recovery in the rate over the next 6 months.

Obviously talking my own book since we don't complete on our house until July and still haven't got a buyer in the UK. However, i am much more positive about things than i was 2 weeks ago.

Chris

Re: Exchange rate
 

another bad number from Canada, New Building Permits fell year on year by almost 10% (9.9%). There are strong signs slowly coming through of a slowing Canadian economy, which would then lead to rate cuts and take away the strength from the CAD$.

Re: Exchange rate
 

Another disappointing number from Canada, Net Change in Employment for December was expected to show creating an extra 15,000 jobs, when in fact there was a reduction in 18,700 positions. As predicted with the continued drip feeding of weaker data from Canada the rate climbing 1.9932 as i post.

Chris

Re: Exchange rate
 

Hi all

I'm no economist by any means but I am really interested in how this all works.

Is it purely the interest rate on offer making the CAD$ attractive, If rates are cut in UK and US and from what I read they are expected to be cut quite firmly, will the CAD$ retain a relative advantage?


Cheers

Tom

Re: Exchange rate
 

It is a number of things but expectations of future interest rates certainly plays a big part. People have know since the Northern Rock mess that UK rates were going to come down and probably quite quickly, therefore you saw the sterling weakness late last year. Now the Canadian economy seemed to be riding the storm and remaining very buoyant while the US and a number of other so called developed nations were suffering, however people have been concerned by a possible lack of exports to the US because of the slowdown there, they have been waiting for the first signs of a Canadian slowdown, the last couple of weeks have brought data that suggests we may be seeing that. Slowdown in Canada gives the Bank of Canada the ammunition to cut rates. Which is something they have probably wanted to do for sometime as they have been voicing concern over the strong CAD$.

This is all part of the great 'carry trade' institutions borrow money from low interest rate countrys such as Switzerland and Japan and invest and invest it in high interest rate countries, such as New Zealand, Iceland and more stable countries such as Canada. In order to do that they sell the currency the borrowed and purchase the currency they are investing in.

Hope that helps

Chris

Re: Exchange rate
 

Chris,

In layman's terms - are we (in the Uk) going to see a better exchange rate against the CAD or not if all that you said happens? It's currently 2.0055 - are we likely to see it reach the heady heights of the 2.20s or 2.30s again in the next 4 or 5 months?

Cheers

Steve

Re: Exchange rate
 

That is the million dollar question at the moment, personally I don't think we will see $2.30 in 2008.

Re: Exchange rate
 

Hi Steve

That's exactly what i was trying to figure out. With the UK and US rates dropping and dragging a chunk of the world economies with them, I am trying to figure out what would change the relative position of CAd$ to Sterling. Would a recession drive commodities up or down? I would have thought that as long as commodities stay reasonably fair then the Canadian economy shouldnt fall as far as UK or US which seem to be largely propped up on consumerism and house prices.

As I said though I am no economist. We are hoping to move sometime this year nad have a decent lump sum in the bank that we can change if the conditions seem favourable rather than waiting for a house sale and being forced to change at a given time.

I expect we will spread it out over maybe 4 exchanges unless it shoots off to something great like 2.35

Cheers
Tom

Re: Exchange rate
 

The difference between 2 and 2.3 is 2 decent 2nd hand cars. We hope to move out in 4 to 6 months so there is still time for movement. Even if we manage to get 1 car out of it then that will be a bonus!

Re: Exchange rate
 

much the same here Steve the rate isn't a deal breaker it just gives us choices on things like cars etc. as you say. Anything better than 2 and I wont be too upset given the rates over the last 6 months. I think it was stated earlier on this thread that historically the rate is best in February. I don't think we will be anywhere near ready to move in February but if the rate is good we may change a chunk of money in anticipation.

Its a minefield isn't it.

tom

Re: Exchange rate
 

I don't expect to see 2.20 plus in 2008, very unlikely. Unless there is a banking crisis within Canada.

Oil prices appear to be subsiding , everyone knows where UK rates are going, and no-one expects Bank of Canada rates to stay where they are anymore. UK rates are forecast by a number of big banks to fall to 4.25% this year, from current rate of 5.50% as that is very aggressive, pretty much worst case scenerio. I may opinion there is the strong possibility they don't go that far, which would be sterling positive. Bank of Canada i have not seen any rate calls as yet, however the picture will emerge slowly with further weaker data that gives Dodge the excuss to cut rates, they don't like the strength in CAD$ it hurts exports and has driven people to shop in the US, something they are ken to address.

As spring starts and the doom and gloom merchants get of the price of oil and heating oil, then i am expecting CAD$ to move back towards 2.10 versus sterling.

Chris

Re: Exchange rate
 

The general opinion from the lenders point at the present time is that there will be a cut in feb, and then april and that rates will settle around 5. But then when the rate rose 5 times from 2006 the general opinion was 2 rate rises which turned out to be 5.

I guess the question is how would a large tumble in exporting from Canada really effect the economy?

Re: Exchange rate
 

Citibank and Jp Morgan calling 4.25% by end of year. Feb cut is priced in. Also US FOMC 90% likely to cut 0.50% at the end of the month.


Chris