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Monthly Currency Update - GBP/CAD July 09.

Monthly Currency Update - GBP/CAD July 09.

Old Jun 30th 2009, 10:38 pm
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Default Monthly Currency Update - GBP/CAD July 09.

Hi All,

Here is an overview of what’s been happening in the Currency Markets throughout June with the Canadian Dollar.

The summer has finally taken hold down in Windsor and it looks like we could be in for some record breaking temperatures over the coming weeks! (Fingers crossed). I’m sure many of you will be jetting off to even warmer climes over the coming weeks, so all the best to those that are.

The start of June saw the fresh green shoots from the UK economy prompting higher levels of GBP/CAD but the shaky political situation, rudely interrupted this buoyancy. Some stability was restored after Canada’s unemployment rate spiked to an 11-year high in May as the worst recession since World War Two led to massive lay-offs. Net job losses totalled 41,800 and the unemployment rate surged to 8.4% from 8.0% in April, much worse than expected a trigged an immediate drop in the local Dollar. The report came after the Bank of Canada held its key interest rate unchanged at 0.25%, but send a shot across the bow of the currency markets with unusually strong comments on the threat posed by the sharp appreciation of the CAD. The Central Bank reaffirmed its pledge to hold rate where they were for another year. It made no mention of unconventional monetary easing, upholding its view that further stimulus is not require at present.

A growing belief that the British economy is poised for recovery helped Sterling gain against the Canadian Dollar mid June. The CAD was dented early on after Canada unexpectedly posted a trade deficit in April on slumping exports while new house prices fell by the most in almost two decades, showing the economic crisis is still biting despite talk of recovery. The trade deficit for April was CAD179 million, the third time the balance had slipped into the red since December. The Canadian authorities added that it would run a CAD50.2 billion budget deficit this year, but would stick to an earlier promise to return to surplus by the 2013-14 fiscal year. Prime Minister, Stephen Harper noted that economists now expect gross domestic product to shrink 4.3% this year compared with a previous forecast of a 2.7% decline back in January.

Canada’s annual inflation rate slumped to a 15-year low of 0.1% in May as cheaper petrol and cars were partially offset by rising food costs. But even though the year-on-year price gain was the lowest since November 1994, it was stronger than the drop of 0.2% expected by the market.
The CAD later came under renewed pressure as Canadian retail sales slid unexpectedly in April as consumers sharply scaled back purchases of cars, petrol and food – a sign of weakening demand amid the worst recession in nearly two decades. Sales fell 0.8% on the month, partially offsetting three consecutive monthly gains and posted the sharpest decline since December.

GBP/CAD rallied to a fresh seven-month high last week as see-sawing oil prices and equity markets weighed on the commodity-linked Canadian Dollar. The CAD slumped despite foreign investors buying more Canadian securities in April than expected, scooping up provincial government bonds and stocks in information technology and energy firms. Foreign investment in Canadian securities totalled CAD9.05bln, much more than the CAD5.5bln forecast and up from CAD7.19bln in March. There was also little reaction to Canadian Finance Minister, Jim Flaherty’s comments on Wednesday that he was seeing more positive signs that negative ones in the country’s economy. “Certainly there are positive indications of stabilisation instabilization What we want to look for now are signs of the beginning of economic growth.”

Current Central Bank Rates:

Canada (Bank of): 0.25% (Next Meeting 21st July)
UK (Bank of England): 0.50% (Next Meeting 9th July)

Highs & Lows of June:

High: 1.9299 – on the 30/06/09
Low: 1.7600 – on the 01/06/09

Difference on £200k

High: 385,980 CAD
Low: 352,000 CAD

A difference of 33,980 CAD

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Mark Bodega
Director - HiFX
Windsor2 is offline  

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