GBPCAD currency pair has broken the long term uptrend that had started in 2013 when prices moved away from the 1.55 record low. Since then the UK economy grew and the price of oil fell. The exchange rate gained over 35% and was topped out just over 2.10 at the end of 2015. The exchange rate broke the uptrend soon after the US Federal Reserve raised rates in December GBPCAD and saw a sharp decline of over 10%.This has been helped by early signs of optimism over the price of oil. Some analysts felt oil has hit its low and now is now beginning its recovery as it sits near a 10 year low.
Market data is taking a back seat and will continue to do so where the Pound is concerned. The EU membership vote will take place in the UK on 23rd June and the market isn’t confident that the UK will vote to stay in the EU based on how close the polls are at the moment. This uncertainty is only adding to the Pound's woes and we’re seeing evidence of a slowing UK economy triggered by a fall in business activity – businesses putting off large scale investment into the UK until the vote has happened. Investors and funds alike are trimming their exposure to a potential “Brexit” (Britain leaving the EU) as businesses are taking out large GBP contracts to hedge against possible collapse in the Pound and the net effect is a weakening Sterling.
Forecasting the fortunes of the Pound over the next few months is going to be difficult. In simple terms the Pound may continue to weaken if polls indicate both sides of the coin and until the final ballots are in, the Pound will continue to remain under pressure for the foreseeable future.
If polls indicate a growing probability of a comfortable win for the ‘In the EU camp’ then over the coming weeks in the run up to June 23rd
, the Pound will find support and should stabilise against major currencies.
For those with a little longer to play with, holding off trading would be the best strategy. You may conversely believe that the UK will vote in favour of leaving in which case you’ll want to get your funds converted sooner rather than later. For those of you that aren’t sure which way the voting’s going to go you might want to hedge your bets and trade a portion of your funds sooner rather than later.
For those looking to sell GBP and buy CAD before the June referendum we would suggest biting the bullet and transferring a good portion of your funds at current levels as we expect the Pound to continue its rocky road in the coming months. Contact your Halo Financial consultant
for more information.
Research Report by Michael Hart
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