GBP/CAD November 09 Currency Update

Hi All,

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

After a 0.1% increase in June, gross domestic product was flat in July, raising doubts about whether gross domestic product would return to solid growth in the third quarter. Strength in manufacturing and wholesale sales was offset by a decline in the mining sector, showing that some parts of the economy were still struggling. Analysts had expected a 0.5% month-on-month rise in July. Finance minister Jim Flaherty said the flat GDP number showed the tenuous state of the recovery, repeating that it is too early to withdraw extraordinary stimulus measures that have propped up the Candia economy.

The BoC (Bank of Canada) kept its overnight interest rates at a record low 0.25% and reiterated its intention to keep it there through to mid-2010. Far from giving any suggestion of an early exit from its extended low-rate strategy, the Bank said a return to economic normalcy would be delayed. It said the output gap, reflecting excess supply in the economy, would not be closed until the third quarter of 2011, three months later than it had earlier forecast. It also forecast that inflation would not return to its 2.0% target until the third quarter of 2011, also a three month delay. The CAD later ignored a better than expected Canadian retail sales report mid month, despite this adding to recent evidence that the economy is crawling towards recovery.

Finally on GBP/CAD fell in response to the shock news that contrary to all forecasts, the UK had continued to contract in Q3.

Last week a broadly stronger Sterling capitalised on disappointing Canadian GDP figures, putting the Bank of Canada’s forecast for third-quarter growth in doubt. Canada’s gross domestic product shrank by 0.1% in August, confounding expectations for 0.1% growth after a month of stagnation in July. The data unwound initial CAD strength as the market took comments by BoC Governor Mark Carney as signalling there is less risk the Central Bank will intervene directly to temper the currency’s rise. He told a parliamentary committee that the BoC is happy with its current policy stance, signalling he did not expect to have to take special steps to tame the CAD’s strength and boost economic recovery.

Current Central Bank Rates:

Canada (Bank of): 0.25% (next meeting 8th December)
UK (Bank of England): 0.50% (next meeting 5th November)

GBP/CAD Highs & Lows of October:

High: 1.7881
Low: 1.6237

A movement of: 10.13%

Difference this would make on £200k

High: 357,620 CAD
Low: 324,740 CAD

A difference of: 32,880 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.

Regards




Jon Sermon
HiFX