Skip to main content
business briefing

Loonie laid low

The Canadian dollar is sitting well below the 76-cent mark today, which by some accounts means there’s another two pennies to go before it bottoms out.

Having been buffetted by everything from the oil price crash to speculation over the timing of interest rate hikes in the United States and Canada, the loonie is at a shade above 75.5 cents U.S.

And many forecasters believe it’s going to sink further.

The latest projection, from CIBC World Markets, suggests it’s headed to a low of about 73.5 cents by early next year.

“Although Canada won’t know the exact fiscal plans of the newly elected government until a budget is tabled, the platform on which the party ran indicates that a modest dose of stimulus, worth a bit more than 0.5 per cent of GDP is on the way,” CIBC said this week.

“That means the policy mix will be less focused on the Bank of Canada, thus decreasing the likelihood that the central bank will need to cut rates again this cycle,” CIBC economists said in a report.

“Together with the increased certainty that comes along with a majority government, some near-term pressures on the loonie have abated.”

But that’s the political side of things. On the economic side, the Federal Reserve is headed toward a rate hike, commodity prices are soft, and corporate spending in western Canada could be even softer than forecast.

“While federal fiscal stimulus could offset some of this, infrastructure spending is unlikely to begin until the second half of 2016,” the CIBC strategists said.

“It’s therefore likely that the loonie reaches its weakest level around Q1 2016 as the domestic economy proves it hasn’t fully healed from the oil price shock and the U.S. moves forward with its normalization of monetary policy,” they added.

“Look for USDCAD to hit 1.34 by the end of this year and 1.36 in Q1 2016.”

Which means a loonie worth just shy of 75 cents as 2015 closes out, and and 73.5 cents early in 2016.

Quebec supports Bombardier

The Quebec government is rushing to the aid of an embattled Bombardier with a $1-billion investment in the Canadian manufacturer’s C Series project.

Bombardier announced details of the plan today as it unveiled a third-quarter loss of $4.9-billion, or $2.20 a share, hit by charges on its C Series and Learjet 85 program.

That hefty loss compared to a profit of $74-million or 3 cents a share a year earlier.

Bombardier also said it is still looking for a minority investment in its transportation business.

The provincial investment will be made via a limited partnership for the C Series jet project, which has been hit by cost overruns and delays. Bombardier will own 50.5 per cent and has pledged to keep that business in Quebec for at least 20 years.

The government owns the rest, and also gets warrants for up to 200 million class B shares of Bombardier.

Control of the company won’t be affected, Bombardier added.

“This partnership comes at a pivotal time, with the C Series on the verge of certification,” chief executive officer Alain Bellemare said in a statement.

Deutsche Bank overhauls

Deutsche Bank unveiled a major retrenchment today as it posted a hefty third-quarter loss.

The giant German bank plans to cut tens of thousands of jobs over the next couple of years at the same time as it shuts down some operations in specific locations and pulls back elsewhere.

“In the third quarter 2015 we reported a record net loss - a highly disappointing result that was largely driven by items we had already flagged earlier in October,” John Cryan, the co-CEO, said in a statement as he announced the quarter loss of €6-billion, or more than $6.5-billion (U.S.).

Pfizer eyes Allergan

If you think the cost of drugs is high, take a look at the numbers being thrown around today as Pfizer moves in on a potential takeover of Allergan, the maker of Botox.

Pfizer confirmed it has held initial talks with Allergan, whose market capitalization was at about $113-billion (U.S.) before the reports.

Marrying the two companies would mean a market cap somewhere in the area of $300-billion and the creation of the world’s biggest pharmaceutical concern.

Death and taxes: Governments target smokers, rich