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Briefing highlights

  • Loonie to stay weak
  • Oil prices hit year low
  • A Trudeau scene I’d love to see
  • Markets at a glance
  • Annual inflation rises in Canada
  • Retail sales inch up
  • Long lines mark start of Black Friday

And we talked about some old times

And we drank ourselves some beers

Still crazy after all these years

— Paul Simon

The Canadian dollar will still be bruised two years from now, CIBC World Markets says.

Indeed, its economists just “shaved some strength off” the loonie in its latest forecast this week in the wake of the oil price slump and the U.S. dollar’s power.

That loss of strength is for the fourth quarter. But notable in CIBC’s outlook is that the value of the currency won’t be much different by the final quarter of 2020.

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The loonie gained from the settlement of trade talks between Canada, the U.S. and Mexico, but that glow has now faded, chief economist Avery Shenfeld and economist Katherine Judge said in their outlook.

The currency’s weakness comes as West Texas Intermediate and Western Canada Select suffer, the latter far more troubled than the U.S. crude benchmark.

“Although weakness in both WTI and WCS has tempered expectations for a December Bank of Canada hike, a modest further dose of hikes could be on the agenda in early 2019 if OPEC sufficiently curtails production,” Mr. Shenfeld and Ms. Judge said, referring to the oil cartel’s expected supply cap at its meeting in early December.

“But the loonie will track weaker than we earlier thought until that happens, and our year-end level of 1.31 for USDCAD entails a slightly softer Canadian dollar than our prior forecast.”

They were referring to the U.S. and Canadian currencies by their symbols and, at 1.31, a loonie below 76.5 US cents.

Mr. Shenfeld and Ms. Judge expect the Bank of Canada to raise its benchmark rate twice in the first few months of next year, by one-quarter of a percentage point each time, which would take it to 2.25 per cent.

Rate hikes are loonie-friendly, so the pace of the central bank’s increases play a role in the currency’s outlook. But its moves “will be limited” because of the swollen debt levels among Canadian consumers, and the central bank will trail its U.S. counterpart, the Federal Reserve.

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“A slowing economy will cause the BoC to lag the Fed, particularly since, even if Ottawa eases up a bit on corporate taxes, the economy will still be seeing fiscal tightening by Ontario and some other provinces,” Mr. Shenfeld and Ms. Judge said.

“That should see USDCAD settle in the low 1.30s next year.”

That 1.30 translates to a Canadian dollar at just shy of 77 US cents.

But CIBC’s outlook puts the loonie at slightly above 74.5 US cents by the end of 2019, then back to almost 77 cents by the end of 2020.

Read more

A Trudeau scene I’d love to see

Today, we sent a letter to the postal union, warning them we may force them back to work. Letters are these things they had in the olden days ...

Sean Kilpatrick

Read more

Markets at a glance

Read more

Inflation rises

Here’s one way of looking at Statistics Canada’s latest findings: We’re shopping a bit more, and paying more than expected for it.

Annual inflation in Canada rose to 2.4 per cent in October, the agency said today. That was more than expected, and an increase from September’s 2.2 per cent.

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Note than prices at the gas pump climbed 12 per cent.

Retail sales, in turn, rose 0.2 per cent in September. If you strip out price changes, sales rose 0.5 per cent by volume.

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