The Canadian dollar is riding the Brexit wave and strengthening against the GBP. The Loonie recorded the strongest high in 3 months due to the last minute Brexit deal and stronger economic data. Britain and EU carved out a better deal to facilitate smooth transition and avoid negative impact on the global economy due to Brexit.
Many factors such as positive outlook, increased demand for Canadian Yield bonds, positive news from job markets and Bank of Canada deciding not to alter the interest rates played a significant role in the CAD rally. The news about the improved Brexit deal have further strengthened the CAD forecast.
Canada being an economy that is largely based on commodities, any news that effects the global commodity outlook affects the CAD forecast. The Canadian manufacturing sales have increased by 0.8% in August and outperformed the forecast of 0.6%. This is mainly due to increased motor vehicle sales and sale of fabricated metal products. The Global weakness has not affected the Canadian economy, which remained resilient and contributed to the positive rally of CAD.
Another factor that has contributed to the CAD rally is the fact that the Bank of Canada has retained the interest rate at 1.75% even as their peers all around the world have reduced the rates considerably to aid slowing economies.
Canada also has recorded a positive growth in employment rates. The country has added 28,200 new jobs in September along with an increase in the wage rates. This has also contributed to the strengthening of the Canadian Dollar.
The elections this time did not have any major impact on the price of the CAD. The striking similarities between the economic policies of both the leading political parties may be one of the reason for this phenomenon. Both the parties have promised similar tax-cuts and other economic policies, although there is difference in the climate policies of both the parties.
The resolution of trade disputed between the USA and China is also aiding the CAD rally as it has a positive impact on the global trade scenario.
To sum up different factors such as Brexit deal, resolution of US-china trade disputes, positive employment and wage growth, and interest rate policy of Bank of Canada have contributed to a positive growth in the CAD forecast.