There has been a lot of important events in geopolitics that impact national economies. To get kicked off this week, I wanted to put events like Brexit and the weak price of oil in context of the currency trades with the US Dollar.
US Dollar versus the British Pound Sterling
While the USD has gained considerable leverage versus the pound sterling since a couple years back, the impact of Brexit is crystal clear. The moment news of the referendum came out, the dollar surged versus the pound.
Given that the US is the trading partner that’s supposed to make up access to the European market, this trend has major impacts on trade deficits.
US Dollar versus the Euro
The constant upheaval in banking regimes and sovereign debt risk seems to be taking its toll over time. It’s interesting to see that the news of Brexit didn’t impact USD vs. EUR even further.
US Dollar versus the Canadian Dollar
Full disclosure – the record highs of the CAD versus the USD appeared unholy to me. The first time I paid $12 USD for a Molson at the airport, I knew that life would never be the same. Growing up on the border of Quebec, I only knew two things for sure: Chewbacca was real and the Canadian dollar was worth roughly 30% less than ours. One banking crisis later, my world was torn asunder.
Meanwhile, in 2016, the extreme weakness in oil prices has been wreaking havoc on the Canadian economy, especially in booming Alberta. But it makes a trip to Montreal much more reasonable for us, so hey.
Implications of a high US dollar
I remember the wise words of one Wall Street analyst regarding currency ebbs and flows: Don’t think of it as strong, think of it as high. High might be good, but it also might be like high blood pressure.
Looks like America is in for a a high dollar. If your business is global, how might this effect you?