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Hi All,

As promised here’s a brief update on what’s been happening with the Canadian Dollar over the last week.

GBP/CAD rallied back above 1.70 last week as the pound rose in expectation of the UK escaping recession and the Canadian dollar fell as the Bank of Canada extinguished speculation that it would follow Australia in hiking interest rates quickly. The BoC warned that favourable economic developments were being undermined by the strength of the Canadian Dollar.

The BoC 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 on Thursday, despite this adding to recent evidence that the economy is crawling towards recovery. Finally on Friday GBP/CAD fell in response to the shock news that contrary to all forecasts, the UK had continued to contract in Q3.

Attention now shifts to Friday’s August GDP (Gross Domestic Product) figures, with the market expecting the Canadian economy to have stabilised and post 0.1% monthly growth from an unchanged reading in July.

GBP/CAD Movement – High’s & Low’s of last week (19/10/09 - 23/10/09)

High’s: 1.7556
Low’s: 1.6821

A movement of 4.37%

Difference on £200k

High: 351,120 CAD
Low: 336,420 CAD

Difference of: 14,700 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.

A further update will be added next week.

Regards
 
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