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Canadian dollar pops 1¢​ in a day as markets kiss ‘immensely unloved’ greenback goodbye

Canadian dollar pops 1¢ in a day as markets kiss 'immensely unloved' greenback goodbye

Briefing highlights

  • Canadian dollar at about 80 cents
  • Canadian real estate trusts to merge
  • Markets at a glance
  • Bombardier posts narrower loss
  • Cenovus profit climbs in quarter
  • Encana results tops estimates
  • Canadian Tire profit rises in quarter
  • Canadian home sales drop in January
  • Quarter of work force takes Shaw buyouts

Loonie pops

The Canadian dollar is sitting at around 80 US cents this morning, bouncing by about a penny from Wednesday's low point as the "immensely unloved" greenback faltered.

The loonie has traded today by between just shy of that mark and 80.2 cents, rebounding from its lowest point of slightly above 79 US cents a day ago.

Its recovery came as anxious investors, initially spooked by a U.S. consumer price index report Wednesday morning, set their angst aside, driving stock markets up and the U.S. dollar down.

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"The U.S. dollar initially kicked higher on the report, while stocks ratcheted lower, however the effect was short-lived as equity markets subsequently recovered, while the U.S. dollar fell back sharply, in a somewhat counterintuitive reaction to the prospect of higher rates in the months ahead," said CMC Markets chief analyst Michael Hewson.

The Canadian dollar is still below the 81.5-cent mark of early February, just before the market turmoil began with a U.S. jobs report that showed stronger wage growth, suggesting inflationary pressures that could push the Federal Reserve to raise interest rates three or four times this year.

"This was driven by the broad USD selloff following the CPI result from [Wednesday] morning," said Bipan Rai, executive director of macro strategy at CIBC World Markets.

"Going forward, inflation expectations should move inversely to USD performance as the market has already priced in three hikes from the Fed this year," he added.

"Additionally, a rise in inflation is generally bearish for nominal USD moves over the long-term. For the CAD, we think there's scope to revisit the 1.2300 mark in the coming week."

Referring to the Canadian dollar by its symbol, he meant a loonie at almost 81.5 US cents.

"Of course, factory goods data on Friday will be key to keep an eye out for," Mr. Rai added, citing Statistics Canada's monthly report on manufacturing shipments.

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Going forward, "price is sentiment, as the saying goes, and it is clear that the [U.S.] dollar is still immensely unloved," said IG chief market analyst Chris Beauchamp, citing the fact that the U.S. dollar index has been stopped in its tracks.

That, and "the sharp drop in the wake of the CPI print, raises the prospect of yet another major leg lower for the greenback," Mr. Beauchamp said.

"As a result, the trades of 2017 that worked so well, i.e. buying U.S. equities over their European counterparts, and continuing to push the euro and sterling higher, remain the way to go for those looking for sustained momentum. If fears about a U.S. current account deficit gather pace, there may be an awful lot more downside for the U.S. dollar."

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Real estate trusts to merge

Two Canadian real estate investment trusts are marrying to form what they say will be "the preeminent diversified REIT" in the country.

Choice Properties Real Estate Investment Trust and Canadian Real Estate Investment Trust unveiled a deal they valued at $6-billion.

They'll have 752 properties with 69 million square feet of "gross leasable area." They added they have "committed and long-term support" from Loblaw Cos. Ltd. and George Weston Ltd., with pro-forma combined ownership of 65 per cent.

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Under the agreement announced today, Choice Properties will gobble up Canadian REIT's assets and take on its liabilities. The latter will then redeem outstanding units for a combination of $22.50 cash and 2.4904 in units, per Canadian REIT unit.

"We are excited to be creating Canada's leading diversified REIT," Choice Properties chief executive officer John Morrison said in unveiling the deal, which the two REITs said would value the combined entity at about $16-billion.

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Markets at a glance

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Earnings flood in

Several major Canadian companies are in the spotlight today as their quarterly reports flood in.

Bombardier Inc.

The plane and train maker posted a fourth-quarter loss of $109-million, or a nickel a share, diluted, a narrower hit than the $259-million or 12 cents a year earlier. Revenue climbed to $4.7-billion from $4.4-billion.

Chief executive officer Alain Bellemare described the results as a "very strong performance" that means "we begin 2018 with great momentum."

Cenovus Energy Inc.

The oil patch giant posted a jump in fourth-quarter profit to $620-million, or 50 cents a share, from $91-million or 11 cents a year earlier.

"In the short to medium term, we'll remain focused on driving additional efficiencies across our business while further reducing debt," said chief executive officer Alex Pourbaix.

Canadian Tire Corp.

The Canadian icon also heralded "strong results" that included a jump in fourth-quarter profit to $275.7-million, or $4.10 a share, from $246.8-million or $3.46.

Chief executive officer Stephen Wetmore said the company would take "advantage of the opportunities created by the new and changing retail environment."

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