The removal of the threat of Quebec independence produced a huge sigh of relief from Canadian businesses and those who trade with Canada.
The ousting of the separatist group sends a clear signal that the Quebecois are more interested in a government who focuses on improving the economy, than one which sees Quebec becoming an independent state and furthering the use of French as main priorities.
Having peaked at 1.8640 in the early part of 2014, the Sterling – Canadian Dollar exchange rate dropped to 1.81 in the immediate aftermath of the election results. The strength in the loonie was helped by the advent of an expected upturn in the housing market as the weather improves, and was assisted by improved demand for commodities, a weaker US Dollar and by a more upbeat report from the Bank of Canada.
But where now for the Sterling – Canadian Dollar exchange rate?
Technically, having failed to break the top of its range, this currency pair looks set for a slide to C$1.7840. That would mark the first technical support level for the Pound. It would also be the first real correction in a rally which started at 1.5250 just over a year ago and which took the Pound 22 per cent higher to top out in mid-March 2014. For those moving funds to Canada, whilst we are not quite at the 2014 highs, the exchange rate is still as good as it was in 2009 and 20 per cent better than it was just one year ago.
The challenges for the Pound centre on the uneven recovery in the UK economy and the nervousness that surrounds a consumer led recovery. Sterling is also susceptible to damage to the UK economy from a struggling European export market. Unless the UK’s largest trading area, Europe, starts to mount a significant recovery, the gains that the UK economy can make are always going to be limited. With that in mind, this is an excellent time to buy Canadian Dollars, no matter what your views are on independence, the chosen language or Quebec.
Comments