The Canadian economy isn’t immune to the Brexit bug that’s been causing European markets to fall ill.
“We estimate that confidence and financial spillovers from a ‘leave’ result could shave 0.5 to 1.0 percentage points off GDP growth for the U.S. and Canada in the second half of 2016,” TD Economics said in a note to investors.
The Canadian dollar is weaker, down a penny after opening at 78.42 cents. This is in contrast to the Japanese Yen, which has jumped after the vote, showing an increase of 3.77%.
The TSX index closed at14,071.49before the last referendum vote was cast in the UK on June 23. The day after the vote the TSX index hit a low of 13,790.71, dropping almost 300 points before leveling off at 13,930, a drop of roughly 1.5%.
Leading the fall in the S&P/TSX composite index was the Bank of Montreal, which fell 2.2%, and the Bank of Nova Scotia, down 2.3%.
The governors of the central banks from the G7 countries said in a press release that they are taking steps to ensure “adequate liquidity and ensure financial stability.”
The Canadian central bank has a number of liquidity facilities available to help maintain levels of liquidly with commercial banks. One tool in the Bank of Canada’s financial tool belt is the Standing Liquidity Facility, which is able to provide routine credit advances to commercial banks that are experiencing temporary liquidity shortages to do unexpected events.
“We also have bilateral standing swap arrangements with other central banks to be able to provide liquidity in foreign currencies, if required” said Martin Bégin, senior media relation’s consultant for the Bank of Canada.
The exact strategy and measures taken by the Bank of Canada will be determined based on continual monitoring of market conditions.
