Briefing highlights
- Canadian dollar below 78 cents
- Observers see loonie eroding further
- Markets at a glance
- U.S. GDP grows 3%
- Saputo to buy Australian dairy
- TMX to buy Trayport from ICE
- J.C. Penney plunges on forecast
- Imperial Oil profit sinks
- Exxon results beat forecasts
'Last, best hope'
The Canadian dollar is sitting below 78 cents (U.S.) today, down by three pennies over the course of just a month, and even more since its early September peak.
And further erosion is likely, observers say.
It's a rather swift turn of events for a currency that had been basking in the glow of a hawkish central bank, whose two rapid interest rate hikes pushed it above 82 cents early last month, only to see it slip to 81 cents a month ago, then further to where it sits today.
Its latest tumble came Wednesday when the Bank of Canada held its benchmark overnight rate steady at 1 per cent and signalled a pause in its hiking cycle amid uncertainty over North American free-trade agreement negotiations and the potential impact of its increases on home owners who are buried in debt.
On top of that, as The Globe and Mail's Barrie McKenna reports, central bank governor Stephen Poloz and his colleagues are still optimistic about Canada's economy, but growth is slowing from the strong pace set earlier this year.
"We have been bullish on the medium term outlook for the CAD but have to recognize that risks of a further squeeze higher in the USD looks quite significant now with the policy decision [Wednesday] perhaps the last, best hope of blunting the CAD sell-off for the moment," Bank of Nova Scotia currency strategists Shaun Osborne and Eric Theoret said in a report, referring to the Canadian and U.S. dollars by their symbols.
The next stop, Mr. Osborne said later, may well be around 77.5 cents near-term.
Many observers are now ruling out another rate hike from the central bank this year, whereas previously there had been speculation of another move in December, and that plays into the currency markets.
"The repeated references to the CAD weighing on both inflation and exports was enough to send USD/CAD higher and for the CAD to weaken on the crosses," said Bipan Rai, executive director of macro strategy at CIBC World Markets.
"Additionally, that the bank will be 'cautious' with future rate increases is consistent with the view that it is leery about the amount of household debt and will likely to wait and see how the impact from the prior two rate hikes," he added.
"That pretty much suggests that December and January rate hikes are out of the picture and that we should be looking towards March/April for the next BoC hike at this point."
Mr. Rai believes "there's definitely room" for the loonie to trade at between 77 and 78 cents.
- Loonie slumps fast on Bank of Canada rate signal, sinks toward 78¢
- Barrie McKenna: Threat of NAFTA collapse, weak inflation put Bank of Canada on hold
- David Parkinson: Rate hike prospects dwindle as growth cools
- David Parkinson: Falling exports signal a slowing Canadian economy
- IMF warns Canada over perilous, longer-than-average credit boom
Markets at a glance
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U.S. economy grows 3 per cent
The U.S. economy turned in a better third-quarter performance than expected, despite the storm season.
Gross domestic product expanded at an annual pace of 3 per cent, with "few signs of adverse hurricane impacts," said Royce Mendes of CIBC World Markets.
"Hurricanes hit the U.S. in Q3, and the economy hit right back," Mr. Mendes said.
"Consumer spending held up relatively well, supported by the spike in auto sales related to the replacement of damaged and destroyed vehicles. As expected, net trade also was a positive contributor, with residential investment the only major drag on the economy in Q3. The greatest surprise came from the always volatile inventories component, which registered a sizable gain in Q3."
Read more
U.S. economy grows 3 per cent in third quarter on inventories, trade
More news
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- Activist investors torpedo Clariant, Huntsman $20-billion merger
- Precision Drilling reports smaller-than-expected loss
- J.C. Penney shares plunge as it chops 2017 sales, profit forecast
- Imperial Oil reports drop in third-quarter profit
- Exxon’s third-quarter profit beats expectations despite Harvey dent