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Briefing highlights

  • Pressure on loonie expected
  • A Statscan scene I’d love to see
  • Markets at a glance
  • What to watch for today
  • Imperial to proceed with oil sands project

Pressure on loonie expected

Global stock markets are applauding the results of the U.S. midterms, but Kit Juckes has an interesting take on the Canadian dollar:

President Donald Trump’s post-election shackles, coupled with the recent fall in oil prices, will be an overhang on the loonie, the global fixed income strategist at Société Générale says.

“The Canadian dollar still looks cheap to me, but the elections and the price of oil both count against it,” Mr. Juckes said in a report today.

“Frustration will continue, and a return to levels below USD/CAD 1.30 isn’t imminent.”

He was referring to the U.S. and Canadian dollars by their symbols. And that 1.30 figure means Mr. Juckes doesn’t expect the loonie to return to about 77 US cents any time soon.

The loonie was up today, to about 76.5 US cents. The U.S. dollar was weaker.

Like the Australian and New Zealand dollars, the loonie will feel the pressure of global trade tensions, particularly between the U.S. and China, Mr. Juckes said.

That, he added in an interview, is because the Trump administration will focus more on its global trade agenda as the post-election results mean less focus on areas where the president will now be hampered by a divided Congress.

“At the margin, the outcome of the midterm elections in the U.S. will be to hinder further fiscal easing, increasing the likelihood that the economic cycle is peaking, but leave the president free to continue his trade policies,” Mr. Juckes said.

“In all, that’s a slight negative for the [U.S.] dollar, though not against the most trade-sensitive currencies. The yen ought to benefit, the euro and sterling are enjoying a relief rally, but concerns about trade, and about China and the outlook for the [yuan], will remain.”

Other observers agreed with Mr. Juckes that Mr. Trump will now be hampered, and this amid a trade war between Washington and Beijing.

“The split Congress (Democrat House and Republican Senate) means that there is more likely to be gridlock, which will significantly curtail his legislative agenda,” said ING chief international economist James Knightley.

There may be some bipartisan co-operation on some things, notably infrastructure spending, but the divided Congress will stand in the way of the president’s proposed income tax reductions.

“Faced with this, the president is likely to focus his attention on areas where his executive powers give him more leeway to set the agenda, such as trade policy,” Mr. Knightley said.

“This suggests that he is likely to continue pushing hard on China to make concessions that will contribute to getting the bilateral trade deficit lower and do more to protest U.S. intellectual property rights,” he added.

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A scene I’d love to see

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Markets at a glance

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What to watch for today

Besides post-election markets, it’s all earnings, all the time: ATS Automation Tooling Systems Inc., CGI Group Inc., Heroux-Devtek Inc., Home Capital Group Inc., Kinross Gold Corp., Linamar Corp., Manulife Financial Corp., Sun Life Financial Inc. and Western Forest Products Inc.

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