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February 7th, 2010DollarDuring recent months, the Canadian dollar traded a tight range against Sterling between 2.2500 and 2.3000. This follows a sharp uptrend in GBP/CAD from a low around 1.9737 (02/03/06) to a recent high at 2.3567 (23/01/07) caused by expectations of higher interest rates in the UK, coupled with interest rate stagnation in Canada. At the same time, the US$ has weakened, forcing the exchange over US$2 per GBP and down to US$1.11 per CAD giving UK customers a boost while detracting the value for our southern neighbours.
In the UK, the Bank of England left interest rates on hold in April, however, expectations of higher rates in the months ahead continue to offer support to Sterling. With a buoyant housing market and strong levels of consumer spending, the market is expecting that the Monetary Policy Committee (MPC) will be forced to raise rates at least once more in an attempt to dampen down inflationary pressures. The headline Consumer Price Index (CPI the most recognised measure of inflation in the UK) is currently running at 2.8% y/y against a target rate of 2.0% and raising interest rates is the most obvious way of combating rising prices.
Meanwhile, Canada has been faced by interest rate stagnation following the rise to 4.25% in May 2006. Risks to the Canadian economy remain finely balanced with the threat of an economic slowdown filtering across the boarder from the US. As its biggest trading partner, any signs of a struggling US economy may impact the Canadian economy although this has not really been the case so far in 2007. In similar fashion to the UK, the Canadian housing market remains robust with The Canadian Real Estate Association reporting strong sales of existing homes in February and record high average house prices. The Canadian Dollar is also likely to remain well supported against the US$ by rising oil prices given that oil exports represent a large percentage of the Canadian economy.
Looking back to March 2006 GBP/CAD traded a low of 1.9737 (02/03/06) indicating a difference of CAD 32,300 in less than twelve months when looking to transfer 100,000. Therefore, anyone looking to transfer funds between Canada and the UK should pay considerable attention to the GBP/CAD exchange rate as it can have such a dramatic impact upon their future wealth. Should you be looking to move large sums it definitely pays to monitor the markets and be aware of international factors that can affect which direction currencies will go. The debt and ongoing military interventions of the US will undoubtedly have some effect on the US$ against the CAD, though the weak US$ will most likely help boost the exports from their struggling economy. The recent trend of the Dow Jones to smash new records and factory orders starting to increase does point towards the start of a turn around for the US which, if fuelled by the exports will be another reason for the US to try to maintain a weaker dollar.
Advising migrants and businesses of currency movements and protecting them from the risks associated with fluctuating exchange rates is the speciality of currency brokers. Whilst nobody can guarantee future currency movements due to the sheer size and number of participants in the market, both personal and business accounts can increase their bottom lines in dramatic fashion by taking expert advice.
Tags: Bank Of England, Boarder, Canadian Dollar, Canadian Economy, Consumer Price Index, Dollar Performance, Economic Slowdown, House Prices, Index Cpi, Inflationary Pressures, Monetary Policy Committee, Oil Exports, Rising Oil Prices, Southern Neighbours, Stagnation, Strong Sales, Target Rate, Tight Range, Uk Customers, Uptrend
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Tags: Bank Of England, Boarder, Canadian Dollar, Canadian Economy, Consumer Price Index, Dollar Performance, Economic Slowdown, House Prices, Index Cpi, Inflationary Pressures, Monetary Policy Committee, Oil Exports, Rising Oil Prices, Southern Neighbours, Stagnation, Strong Sales, Target Rate, Tight Range, Uk Customers, Uptrend -
January 16th, 2010Dollar
The Dollar Has Become the Worlds Toilet Paper. How Come No One is Worried?
Okay. I am not the worlds authority on anything but my 1966 Mustang. But there are those moments when the back of my neck tingles, and I know Im picking up a bad signal on something. Sort of like what those wild animals must have felt. You know, the ones that headed for high ground days before the Tsunami hit and killed 250,000 people. The scientists were tiptoeing among the dead bodies when it hit them that they hadnt seen any dead animals among the muddy bodies of dead humans. Who knew how those wild animals knew it. But whatever they felt, they listened to it. Hard.
Heres what Im feeling now. Today, the dollar, the US greenback, the piece of paper I work an outrageous number of hours each week for is in trouble. I read with alarm the articles reporting for the past six years that the dollar has slid way way down, from the day when the Euro debuted in 2000 to today, it went from a starting line of equality with the euro to today, when one Euro gets you $1.40. So, the greenback has been in a race with the Euro and now, the euro is worth 40% more. Not swell.
We’re fast running out of countries to feel superior to. During the week of October 8, the US dollar fell to 97 cents versus the Canadian dollar. I love my Canadian brothers but if I can’t make them feel badly that their summers are colder than my winters and my dollar is bigger than their dollar, then what’s the point of living? I traveled to Montreal in June of this year and the US dollar was worth 1.08 Canadian dollars. That’s not as good as in 1998 when I visited Montreal prior to this trip and the greenback was worth 1.30 Canadian –those were the real good ol’ days. Still, this past summer, 1.08 Canadian to my buck still afforded me a bit of swagger. Now its worth 97 cents. Thats a loss of 11 cents in less than 4 months.
The experts in economics react with a tut, tut to all of us ignorant enough to be concerned. According to economists quoted in every article Ive seen about the decline of the dollar, none of us should be concerned because the decline simply means that the goods produced here at home are now cheaper to Europeans, about 40% cheaper in fact. That means European and other foreigners can now Buy American. That will translate into our factories and companies selling more to the overseas crowd. And that will mean more income for our employers who will be able to pay us more because they will have make more. The only losers, the experts say, will be those Americans who want to vacation in Europe. Our dollar wont go very far, so we wont be able to buy as much French wine or German autos. Sounds good, right? But then theres that feeling at the back of my neck. Something is very wrong with this picture. American buying power, which is what the greenback represents, is shrinking, unless the Europeans and other foreigners buy enough of our cheap goods (what are we China?) to offset the value of our in currency. If the factory I work for sells just a few more cars to Europe, it wont make enough to offset the shrinking buck. Who is keeping track for working, middle class families? I remember not too long ago hearing politicians say a strong dollar is American policy. So who is letting this free fall happen? Whos in charge? Think of Zimbabwe. Used to be called Rhodesia. Its got a currency that is so devalued, so worthless, that if someone pays you at 9:00 in the morning, by noon, you need another cash injection just to come out even. Runaway inflation. As a currency goes into the Toilet, workers dont want to be paid in that currency. They want to be paid in some of the good stuff. Would you rather be paid in a currency thats stable. Or want thats losing value worldwide. See what I mean. Theres that nagging feeling at the back of my neck again.
Tags: 4 Months, Back Of My Neck, Bad Signal, Canadian Dollar, Canadian Dollars, Dead Animals, Dead Bodies, Equality, Good Ol Days, Greenback, Montreal, Mustang, October 8, Piece Of Paper, Six Years, Starting Line, Swagger, Toilet Paper, Tut Tut, Wild Animals
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Tags: 4 Months, Back Of My Neck, Bad Signal, Canadian Dollar, Canadian Dollars, Dead Animals, Dead Bodies, Equality, Good Ol Days, Greenback, Montreal, Mustang, October 8, Piece Of Paper, Six Years, Starting Line, Swagger, Toilet Paper, Tut Tut, Wild Animals