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Fergal Smith

Eying more equitable recovery, Bank of Canada's Macklem may commit to above-target inflation

2:51pm BST

TORONTO Bank of Canada Governor Tiff Macklem is likely signing up for inflation running above target as he seeks an economic recovery that raises prospects for everyone, making Canada's central bank just as dovish as the U.S. Federal Reserve, say economists.

CANADA FX DEBT-Canadian dollar hits 6-week low as Wall Street tumbles

21 Sep 2020

(Adds dealer quotes and details throughout; updates prices) * Canadian dollar weakens 0.8% against the greenback * Loonie touches its weakest since Aug. 12 at 1.3320 * Canadian new house prices rise 2.1% year-over-year in August * Canadian bond yields ease across a flatter curve By Fergal Smith TORONTO, Sept 21 The Canadian dollar fell to a near six-week low against its broadly stronger U.S. counterpart on Monday, as oil prices declined more than 4% and rising coronavirus infections weighed on investor sentiment. The loonie was trading 0.8% lower at 1.3310 to the greenback, or 75.13 U.S. cents. The currency touched its weakest intraday level since Aug. 12 at 1.3320. "The USD has caught a risk-off, safe-haven bid due to the turbulence in the equity markets," said Tony Valente, a senior FX dealer at AscendantFX. "It seems that equity markets haven’t finished their September correction yet." Wall Street's main indexes slid to seven-week lows as renewed lockdown measures in some countries due to the spread of the virus cast doubt over economic recovery. The sell-off in oil, one of Canada's major exports, intensified pressure on the loonie, Valente said. U.S. crude oil futures settled 4.4% lower at $39.31 a barrel as rising coronavirus cases stoked worries about global demand, while a potential return of Libyan production bolstered oversupply fears. Canada has also seen a rise in coronavirus infections. On Saturday, Ontario, the country's most-populous province, cracked down on private social gatherings. Canadian new house prices rose 2.1% year-over-year in August, which was the largest increase since March 2018, Statistics Canada said on Monday. Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 2.9 basis points to 0.552%. Canadian Prime Minister Justin Trudeau is scheduled to unveil on Wednesday what he says is a far-reaching plan to help Canada recover from the coronavirus pandemic. (Reporting by Fergal Smith; Editing by Will Dunham and Peter Cooney)

CANADA FX DEBT-Canadian dollar weakens for 2nd straight week as stocks fall

18 Sep 2020

(Adds strategist's quotes and details throughout; updates prices) * Canadian dollar falls 0.2% against greenback * Canadian retail sales rise 0.6% in July * Price of U.S. oil settles 0.3% higher * Canadian bond yields edge higher across the curve By Fergal Smith TORONTO, Sept 18 The Canadian dollar weakened against its U.S. counterpart on Friday as a sell-off in technology shares weighed on investor sentiment and domestic data showed a drop in underlying retail sales, with the loonie falling for the second straight week. The Canadian currency was trading 0.2% lower at 1.3193 to the greenback, or 75.80 U.S. cents, having traded in a range of 1.3137 to 1.3208. For the week, the loonie was down 0.1%. "I think it is just a reflection of broad market risk," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. "The Canadian dollar this year has taken its cue from what's been going on outside its borders." U.S. stocks turned lower in volatile trading as worries about rising coronavirus cases and a patchy economic recovery dampened risk sentiment, with technology-related stocks reversing early gains to extend their declines to a third consecutive day. Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital. U.S. crude oil futures settled 0.3% higher at $41.11 a barrel, extending this week's rally after Saudi Arabia pressed allies to stick to production quotas. Canadian retail and wholesale sales both rose in July and were higher than before the coronavirus pandemic struck, Statistics Canada said, pointing to further evidence of a partial economic recovery. Still, the 0.6% gain for retail sales was much more modest than the advance in June, while core retail sales, which exclude sales at motor vehicle and parts dealers and gasoline stations, declined 1.2%. Canadian government bond yields edged higher across the curve, with the 10-year up half a basis point at 0.578%. (Reporting by Fergal Smith; Editing by Paul Simao)

CANADA FX DEBT-Canadian dollar rebounds from a one-week low as oil rallies

17 Sep 2020

(Adds strategist quotes and details throughout, updates prices) * Canadian dollar rises 0.1% against the greenback * Price of U.S. oil settles 2% higher * Loonie touches a one-week low intraday at 1.3247 * Canada sheds 205,400 nonfarm payroll jobs in August By Fergal Smith TORONTO, Sept 17 The Canadian dollar edged higher against its U.S. counterpart on Thursday as oil prices climbed, with the loonie recovering from an earlier one-week low, which it hit as investors turned more risk averse. The loonie was trading 0.1% higher at 1.3159 to the greenback, or 75.99 U.S. cents. The currency touched its weakest intraday level since Sept. 9 at 1.3247. The rally in oil prices helped the loonie rebound, said Ronald Simpson, a global currency analyst at Action Economics. Reports that OPEC "sees signs of economic recovery in some areas, and signs of easing inventory surpluses" boosted oil, Simpson said. Oil is one of Canada's major exports. U.S. crude oil futures settled 2% higher at $40.97 a barrel, while U.S. stocks fell as technology-related shares extended a recent slide and as data showed high levels of weekly jobless claims. Canada lost 205,400 nonfarm payroll jobs in August, the sixth straight month of decline, a report from payroll services provider ADP showed. The report painted a bleaker picture than recent government labor market data. Canada's retail sales report for July is due on Friday, which could add to evidence of a robust bounce in economic activity that was flagged by the Bank of Canada last week. Carolyn Wilkins, the senior deputy governor at the central bank who lost her bid for the top job just four months ago, will not seek a second term, the BoC said. Canadian government bond yields were little changed across much of the curve, with the 10-year trading at 0.573%. Strategists say that setting a target for bond yields could help the BoC reduce the amount of debt it buys to keep interest rates low, checking a threat to market liquidity after the central bank's share of bonds more than doubled this year. (Reporting by Fergal Smith; Editing by Andrea Ricci and Jonathan Oatis)

Bank of Canada senior deputy Wilkins, passed over for top job, to leave bank next year

17 Sep 2020

OTTAWA/TORONTO Carolyn Wilkins, the senior deputy governor at the Bank of Canada who lost her bid for the top job just four months ago, will not seek a second term, the bank said on Thursday.

CANADA FX DEBT-Canadian dollar climbs to near one-week high on dovish Fed

16 Sep 2020

(Adds dealer quotes and details throughout, updates prices) * Canadian dollar was rises 0.1% against the greenback * Canada's annual inflation rate remains at 0.1% in August * Price of U.S. oil settles 4.9% higher * Canadian bond yields rise across a steeper curve By Fergal Smith TORONTO, Sept 16 The Canadian dollar rose to its strongest level in nearly one week against the greenback on Wednesday, before giving up some of its gains, bolstered by higher oil prices and the Federal Reserve's promise to keep interest rates pinned near zero. The Fed released new economic projections which showed interest rates on hold through at least 2023, with inflation never breaching 2% over that time. "The message is dovish, dovish, dovish," said Michael Goshko, corporate risk manager at Western Union Business Solutions. "The Fed's emphasis on U.S. interest rates being low for longer ... might just give the green light to Canadian dollar bulls." The price of oil, one of Canada's major exports, jumped following a drawdown in U.S. crude and gasoline inventories and as Hurricane Sally forced a swath of U.S. offshore production to shut. U.S. crude oil futures settled 4.9% higher at $40.16 a barrel, while the Canadian dollar was trading 0.1% higher at 1.3169 to the greenback, or 75.94 U.S. cents. The currency touched its strongest intraday level since last Thursday at 1.3123. Canada's annual inflation rate remained at 0.1% in August as rising food prices were offset by declining gasoline costs, Statistics Canada said. Underlying inflation was firmer, with the average of the Bank of Canada's three core measures of inflation ticking up to 1.7% from 1.6%. Setting a target for bond yields could help the Bank of Canada reduce the amount of debt it buys to keep interest rates low, checking a threat to market liquidity after the central bank's share of bonds more than doubled this year, strategists said. Canadian government bond yields rose across much of a steeper curve, with the 10-year up 1.4 basis points at 0.571%. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Jonathan Oatis)

ANALYSIS-Yield targets could help reduce Bank of Canada's bond market footprint

16 Sep 2020

TORONTO, Sept 16 Setting a target for bond yields could help the Bank of Canada reduce the amount of debt it buys to keep interest rates low, checking a threat to market liquidity after the central bank's share of bonds more than doubled this year, strategists said.

CANADA FX DEBT-C$ dips as investors 'lighten up' on dollar shorts ahead of Fed decision

15 Sep 2020

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar weakens 0.1% against the greenback * Canadian factory shipments rise 7.0% in July * Canadian home sales climb to a record high in August * Canadian bond yields were little changed across the curve By Fergal Smith TORONTO, Sept 15 The Canadian dollar edged lower against its U.S. counterpart on Tuesday as investors scaled back bets against the greenback ahead of a Federal Reserve interest rate decision, with the loonie unable to get a lift from encouraging domestic data. The loonie was trading 0.1% lower at 1.3185 to the greenback, or 75.84 U.S. cents. The currency traded in a range of 1.3134 to 1.3202. The market is "seeing some entrenched USD shorts lighten up here ahead of a Fed meeting that likely won't deliver anything new when it comes to 'actual' policy action," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. The Fed's interest rate decision is due on Wednesday, which will be the first since it unveiled a landmark shift to a more tolerant stance on inflation in August. The U.S. dollar clawed back much of its decline against a basket of major currencies, while U.S. crude oil futures settled 2.7% higher at $38.28 a barrel. Oil is one of Canada's major exports. "I think USD-CAD traders have been right to ignore today's rise in crude because it's not a demand story, but simply the market pricing in some Hurricane Sally risk," Bregar said. Canadian factory sales rose for the third straight month in July, climbing 7.0% from June, Statistics Canada said. Separate data, from the Canadian Real Estate Association, showed that home sales increased 6.2% in August to reach a record high. Canada's inflation report for August is due on Wednesday, while the July retail sales report is set for Friday. Canadian government bond yields were little changed across much of the curve, with the 10-year up less than half a basis point at 0.558%. (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter Cooney)

CANADA FX DEBT-Canadian dollar steadies as investors await Fed rate decision

14 Sep 2020

(Adds dealer quote and details throughout; updates prices) * Canadian dollar trades near flat against the greenback * Loonie trades in a range of 1.3154 to 1.3196 * Price of U.S. oil settles 0.2% lower * Canadian bond yields edge higher across much of the curve By Fergal Smith TORONTO, Sept 14 The Canadian dollar was little changed against its U.S. counterpart on Monday as investors turned attention to a Federal Reserve interest rate decision later in the week, although it fell against most other G10 currencies. The Canadian dollar was trading nearly unchanged at 1.3179 to the greenback, or 75.88 U.S. cents. The currency, which fell last week for the first time in six weeks, traded in a range of 1.3154 to 1.3196. The loonie was one of only three G10 currencies not to gain ground against the U.S. dollar. The others were the Swedish crown and the Norwegian crown . The safe-haven greenback fell against a basket of major currencies as positive news about a COVID-19 vaccine and a wave of merger and acquisition deals lifted the mood in global equity markets. "We're waiting to see what happens with the Fed and really what their view is on the outlook for the U.S. economy," said Rahim Madhavji, president at KnightsbridgeFX.com. The Fed rate announcement is due on Wednesday. Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures settled 0.2% lower at $37.26 a barrel amid concerns about a stalled global economic recovery and with Libya poised to resume production. Speculators have cut their bearish bets on the Canadian dollar to the lowest in six weeks, data from the U.S. Commodity Futures Trading Commission showed on Friday. Canada's inflation report for August is due on Wednesday, while the July retail sales report is set for Friday. The data could help guide expectations for economic recovery. Canadian government bond yields were slightly higher across much of a steeper curve on Monday. The 10-year rose more than half a basis point to 0.556%. (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)

CANADA FX DEBT-Canadian dollar edges higher but weekly win streak ends

11 Sep 2020

(Adds strategist comments and details throughout; updates prices) * Canadian dollar rises 0.1% against greenback * Loonie ends week down 0.9% * Canadian industrial capacity tumbles to 70.3% in Q2 * Canada's 10-year yield eases 1.4 basis points to 0.550% By Fergal Smith TORONTO, Sept 11 The Canadian dollar nudged higher against its U.S. counterpart on Friday as oil prices steadied and domestic data showed a drop in industrial capacity to a record low, but the loonie ended the week lower after climbing for five straight weeks. The loonie was trading 0.1% higher at 1.3180 to the greenback, or 75.87 U.S. cents, having traded in a range of 1.3151 to 1.3207. It ended the week 0.9% lower. A rebound in the U.S. dollar and lower oil prices weighed on the Canadian dollar this week, said Colin Cieszynski, chief market strategist at SIA Wealth Management. The move "looks like a trading correction," said Cieszynski, adding "it was getting overbought by the end of August." On Sept. 1, the loonie notched a near eight-month high at 1.2990. U.S. crude oil prices settled 0.1% higher on Friday but were down for a second straight week, as investors expect a global glut to persist due to sagging demand with COVID-19 cases rising in some countries. The production capacity of Canadian industries tumbled to 70.3% in the second quarter from 79.8% in the first quarter due to shutdowns to battle the coronavirus outbreak, Statistics Canada said. Separate data from the agency showed the ratio of Canadian household debt-to-income posted a record decline in the second quarter, falling to 166.8%, not seasonally adjusted, from a revised 171.1% in the first quarter. Speculators have cut their bearish bets on the Canadian dollar to the lowest in six weeks, data from the U.S. Commodity Futures Trading Commission showed. As of Sept. 8, net short positions had fallen to 17,355 contracts from 27,006 in the prior week. Canadian government bond yields were mixed across a flatter curve, with the 10-year easing 1.4 basis points to 0.550%. (Reporting by Fergal Smith Editing by Paul Simao and Tom Brown)

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