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business briefing

Briefing highlights

  • Loonie a 'risky bet': CIBC
  • Markets mixed amid sober second look
  • Businesses being created at a fast pace
  • Post-Brexit Scottish independence?
  • Video: Can you protect your job from robots?

Risky business

The Canadian dollar may have fared better than some in the post-Brexit volatility but it appears to be a “risky bet” going forward, CIBC warned today.

“With supply no longer the sole driver of oil prices, the loonie has been more correlated with risky assets recently,” Canadian Imperial Bank of Commerce said in a new forecast.

“Oil prices and global demand have been driving [the Canadian dollar’s] performance and the recent Brexit vote served as further evidence of the loonie’s relationship with risk,” it added.

The pressure on the currency won’t ease in the short term, either, given the uncertainty in the wake of Britain’s decision to leave the European Union.

Nor will the state of the economy help all that much, the bank said.

“Although those developments won’t see the loonie depreciate much more from current levels during the third quarter, a December rate hike from the [Federal Reserve] will see negative front-end spreads drive the Canadian dollar weaker against its U.S. counterpart.”

CIBC projects the loonie will sink to around the 74-cent U.S. level by the end of this year, though it will perk up in 2017 as oil prices gain.

A scene I'd love to see ...

Photo illustration

“We said, we're staying in the EU.”

Court overturns Northern Gateway

The Federal Court of Appeal has quashed the cabinet approval of Enbridge Inc.’s Northern Gateway oilsands pipeline, saying Ottawa failed in its duty to consult with First Nations along the route.

The court ruling is another major blow to the controversial project that was already facing daunting challenges – including meeting the National Energy Board’s 209 conditions, achieving agreement from local aboriginal communities, and confronting the Liberal government promise to impose a ban on crude tanker traffic in the waters off northern British Columbia.

Eight First Nations, four environmental groups and one labour union launched the legal challenge, The Globe and Mail’s Shawn McCarthy and Jeff Lewis report.

Economy inches ahead

Canada’s economy expanded by 0.1 per cent in April, perking up after two months of decline and driven in no small part by manufacturing, according to Statscan.

“It’s a welcome bounce from a soft end to the first quarter, but it will only be temporary relief as the impact of the Alberta wildfires loom,” said Nick Exarhos of CIBC World Markets.

Business creation speeds up

The latest statistics on how fast new businesses are popping up paint a different picture of Canada’s economy in an uncertain climate.

And they’re sure to have caught the eye of the Bank of Canada.

Indeed, says National Bank, the numbers drive home the point that Canada’s economy is no one-trick pony.

Particularly gratifying in the numbers released this week by Statistics Canada is that new businesses are being created at a fast pace even as Alberta’s once-mighty economy is laid so low.

According to Statscan, the number of businesses across the country increased in the first quarter by 2 per cent, or more than 20,000, from a year earlier. About 140,000 businesses were created, while 118,000 disappeared.

It’s the best showing since the recession and, Royal Bank of Canada notes, above the 2000-2008 average.

“That growth is all the more impressive when considering the massive drop of 7 per cent in mining and energy,” said National Bank senior economist Matthieu Arseneau, noting, too, the broad wins across other sectors.

“This should dispel fears that the Canadian economy is a one-trick pony.”

Unfortunately, this doesn’t appear to have translated into many new jobs, though it is a key measure for Bank of Canada Governor Stephen Poloz.

“In a recent speech, Governor Poloz said that he interprets accelerating firm creation as a strong sign that economic growth has become self-sustaining,” said RBC economist Gerard Walsh.

“While the recent uptick in business counts is broad-based, it remains to be seen if it will be sustained and the extend to which the economy’s adjustment to lower commodity prices flows through to firm creation in manufacturing and other non-energy, export-oriented sectors.”

Video: Can you protect your job from robots?