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Sterling to Remain Steady but Bitcoin, Canadian Dollar Face Difficult Times Ahead

Posted Mar 18, 2018

Little has been felt in foreign exchange markets from the UK’s recent political entanglement with Russia, which escalated last week with a tit-for-tat expulsion of diplomats. The pound gained last week against both the dollar and euro and will remain steady for the foreseeable future, according to the collective opinion of FX analysts surveyed by Reuters on Friday.

According to the survey, the British pound, which ended the week buying US$1.394 and €1.135, will be worth marginally more relative to the dollar in twelve months’ time, with a median estimate of US$1.41, and against the euro it will continue to drift along the well-trodden €1.12-1.14 pathway, around which prices have centred since September.

For the Canadian dollar, which remains one of 2018’s worst performing G10 currencies, pessimism prevails. The currency fell last week to fresh 8-month and 8-year lows against the U.S. dollar (US$0.764) and euro (€0.622) respectively, and little respite is likely for the loonie according to TD Securities’ head of FX strategy Mark McCormick.

Speaking to CNBC, McCormick said this week that the Canadian dollar was the “most exposed [major currency] from a global macro level and also from the local level of trade risk.”

“The [Canadian] economy has seen all the pickup in growth it’s going to see…and now everything is starting to move in the opposite direction,” the strategist said.

The market consensus remains for an 8-10% drop in the Canadian dollar’s valuation should NAFTA negotiations with the U.S. and Mexico fail, which would imply CAD/USD rates at or below US$0.7, but other risks for the currency include the potential for a sharp reversal in Canadian interest rate expectations, which may be overdone, according to McCormick.

Per McCormick’s assessment of long-term fair valuation, “the Canadian dollar is really expensive.”

Set to do even worse – much worse – than the Canadian dollar this year is Bitcoin, according to a new forecast.

A Bitcoin price a whisker below $7,700 on Friday might represent a 60% discount on December’s high but is still nearly three times higher than what’s coming, says a technical analyst at Market Securities, Paul Day.

Day has studied Bitcoin’s past price history in an effort to better predict the digital currency’s movements and concludes that we’ll be seeing $2,800 by year-end.

Together with other cryptocurrencies, Bitcoin has battled against a string of bearish news in recent months, including China’s ban on all crypto-related websites, regulatory scrutiny, Facebook’s ban on all crypto advertising, the failure of Bitconnect and the theft of $500 million worth of cryptocurrency from Japanese exchange Coincheck.

 

 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.