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Business Briefing Don’t be fooled by Canadian dollar’s recent rally: I’m ‘happy to be a strategic bear’

These are stories Report on Business is following Friday, Feb. 6, 2015.

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Whither the loonie
The Canadian dollar may have rallied recently, but hold that thought.

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The currency may well not be able to hold those gains from the recent rise in oil prices.

And having said that, it means only that the loonie has rallied back above 80 cents U.S. And having said that, it slipped below that mark again today.

So far today, the currency has been as high as 80.76 cents and as low as 79.72 cents, following the trend of wide swings in the markets of late.

It picked up slightly, only to fall back again, after Statistics Canada reported that the economy pumped out more than 35,000 jobs last month, largely on part-time work, and the jobless rate dipped to 6.6 per cent.

The loonie's recent low has been 78.22 cents, well down from the high of 94.15 cents over the past year.

And most observers expect it to sink far lower still, as low as about the 71-cent range, though many see it ending the slump at about 75 cents, at least at this point.

That's because so much depends on the price of oil, whose dramatic plunge has dragged down commodity-linked currencies like the loonie, as Canada's dollar coin is known.

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But there's a lot more going on here, notably the outlook for monetary policy in Canada and the United States.

Remember, the Bank of Canada shocked the markets last month with a surprise cut in its benchmark rate, and several economists expect Governor Stephen Poloz has at least one more surprise, and maybe even two, up his sleeve.

That comes as the Federal Reserve heads toward a rate hike, and today's jobs report from the United States signals that could come mid-year.

As The Globe and Mail's David Parkinson reports, there has been a race to the bottom among the world's central banks in a very uncertain climate that involves everything from oil to Greek Crisis Round 2.

And so you get observers like Kit Juckes calculating what could happen to the world's currencies based partly on who can still cut further, like the Canadian central bank.

"I don't want to be short yen or euros, where rates can't fall, but remain happy to be a strategic bear of CAD (oil), GBP (politics), AUD (China)," Société Générale's chief of foreign exchange said today, referring to the Canadian, British and Australian currencies by their symbols.

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Jobless rate dips
You've got to take a deeper look to see what's really happening in Canada's jobs market.

True, the economy churned out more than 35,000 jobs in January, and the unemployment rate dipped to 6.6 per cent.

But, as The Globe and Mail's Tavia Grant reports, all of those gains, and more, came from part-time positions, which surged by 47,000.

Full-time jobs actually declined, to the tune of 12,000.

"Canada's job numbers were good, but not quite as good as they looked at first glance, given a tilt to part-time and self-employed positions," said chief economist Avery Shenfeld of CIBC World Markets.

"Factory employment rose 11,000 but is still down from its year-ago level, and the resource sector fell 9,000, a sign of things to come."

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The United States, on the other hand, had a stellar report showing 257,000 jobs created last month, though the unemployment rate inched up to 5.7 per cent.

Not only that, the numbers for November and December were revised up to show 147,000 more jobs than previously estimated.

Digging in
It's not unusual to see a rally in Syntagma Square in Athens.

It is unusual to see a pro-government rally.

After all the social unrest of the past several years in Greece, the country's new prime minister got to see a show of support last night as he pledge to forge ahead on his anti-austerity drive despite the protestations of the Germans.

As our European bureau chief Eric Reguly reports, Greek Finance Minister Yanis Varoufakis, wrapping up a tour aimed at winning some form of debt relief, left Germany empty-handed yesterday.

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Prime Minister Alexis Tsiparas, however, promised to continue his push for renegotiation of the terms of the Greek bailout.

Euro zone ministers are meeting today to discuss that, and investors can expect a pitched battle going forward.

"Greece is willing to play hardball with Europe, and the ECB is willing to play hardball with Greece," economists at Bank of Nova Scotia said today, referring to new rules on collateral unveiled this week by the European Central Bank, which led to a plunge in Greek stocks.

"As Greek Finance Minister Varoufakis has said, the Greek government can accept using a euphemism other than 'haircut' in order to attain a lower debt burden," they added.

"European official institutions are not accepting those moves, and have taken measures to raise interest rates for Greek banks' overnight funding and to further ring-fence the Greek banking system. Both sides are digging in."

Twitter up
Shares of Twitter Inc. surged today after the micro-blogging service's fourth-quarter report late yesterday.

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After markets closed yesterday, Twitter reported a huge jump in fourth-quarter revenue, to $479.1-million (U.S.), topping the estimates of analysts.

Its loss narrowed to $135.4-million, or 20 cents a share, from $511.5-million or $1.41 a year earlier.

Adjusted earnings per share rose to 12 cents from 2 cents.

Housing starts to moderate
The province of Alberta can't catch a break, but everyone's growing awfully keen on Ontario.

Canada Mortgage and Housing Corp. came in with a new forecast today that backs that up, projecting a slump in residential construction starts in the home of the country's oil patch.

Remember, Alberta has led the country in economic growth, and Ontario's now expected to take that crown as it benefits from lower energy costs and a weaker loonie.

CMHC predicted today that, across the country, housing starts will be basically flat this year, with a "slight moderation" by 2016.

Starts are forecast to range between 154,000 and 201,000 this year, and between 148,000 and 203,000 in 2016.

In Alberta, though, starts are projected to fall to 36,000 this year, and 34,500 next, from a 2014 level of 40,590.

They're also expected to dip in Saskatchewan.

"While the large number of migrants to the Prairie region over past years will support sales in the resale market, economic uncertainty created by declining oil prices will impact employment and temper demand," the agency said.

And in Ontario, starts are expected to climb this year to 63,200 this year, and slip to 60,500 in 2016.

"An improving economy will be more supportive of the Ontario housing market in 2015 than it has been in the recent past. However, as home prices continue to grow, particularly for single family homes, demand will increasingly shift to more affordable housing by 2016," Ted Tsiakopoulos, CMHC's Ontario economist, said in a statement.

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