Loonie Drops as Mark Carney is Named the New Governor of Bank of England

The Canadian Dollar, more popular by the name of Loonie, fell from its 2-week high against USD. After the announcement was made that Mark Carney, the current Bank of Canada Governor will become the new Governor of the Bank of England, huge speculation spurred in this neighboring country of US on Carney’s replacement. Jim Flaherty, the Finance Minister has already announced that he is going to form a special committee to find a proper replacement of Carney and the usual practice will be followed during this process. Incidentally, Canada’s biggest export, Crude oil also experienced drops in prices.

According to Camilla Sutton, the Chief Currency Strategist of Bank of Nova Scotia, this news of Carney’s resignation has created tremendous uncertainty among investors over the upcoming economic policies of the country. Camilla added that uncertainty does not do a currency any good and hence, the Loonie is expected to weaken further in the coming days.

Loonie is currently priced at 99.45 cents per USD, after slipping by 0.2%. Incidentally, on 23rd November, Loonie was priced at 99.16 cents per USD. The Government bonds of Canada rose higher and the yield on benchmark 10-year debt went down (It has gone down by 4 basis points and is at 1.75% currently) for the very 1st time within the last 6 days. The 2.75 percent security due in June 2022 is currently priced at C$108.74, after gaining by 33 cents.

Incidentally, Carney, 47, worked with Goldman Sachs Group Inc. for more than a decade and in 2008, was named the Governor of Bank of Canada. Incidentally, since, September, 2010, Carney has kept the benchmark interest rate of Canada at 1% thereby supporting the economy. He also called for a tighter monetary policy for Canada, earlier this year. Carney’s decision to take the helms of Bank of England is shocking to many as he claimed not to be a candidate for the Governor post of the 318-year old institution.

Adrian Miller who works as a fixed income strategist for GMP Securities LLC stated that Carney’s exit is a sad news for Canada. However, the impact will not be much as the Government will come up with a replacement who, most probably, will follow similar lines to that of Carney.