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Fergal Smith

CANADA FX DEBT-C$ sticks to narrow range ahead of Fed interest rate decision

17 Jun 2019

(Adds strategist quotes and details on activity; updates prices) * Canadian dollar trades near flat against the greenback * Price of U.S. oil decreases 1.1% * Foreign investors sell Canadian securities in April * Canadian bond prices dip across much of flatter yield curve By Fergal Smith TORONTO, June 17 The Canadian dollar was little changed against its U.S. counterpart on Monday, holding near Friday's eight-day low as oil prices fell and investors awaited a Federal Reserve policy meeting later in the week. At 3:44 p.m. (1944 GMT), the Canadian dollar was trading nearly unchanged at 1.3413 to the greenback, or 74.55 U.S. cents. The currency, which on Friday touched its weakest level in more than a week at 1.3424, traded in a narrow range of 1.3394 to 1.3420. "The natural home is going to be the 1.33 to 1.35 range for the coming weeks," said Christian Lawrence, senior market strategist at Rabobank. "So much of it is going to be dependent on the Fed on Wednesday." The U.S. Federal Reserve, facing fresh demands by President Donald Trump to cut interest rates, is expected to leave borrowing costs unchanged at an interest rate decision on Wednesday but possibly lay the groundwork for a rate cut later this year. In contrast, the Bank of Canada has signaled in recent weeks that it would remain on the sidelines as it monitors economic developments. "Canadian data is holding up well enough for the Bank of Canada to not adopt a dovish bias, but the underlying trend is much weaker," Lawrence said. Flexible exchange rates are a key reason for the Canadian central bank's success in targeting inflation and will remain an important part of the monetary policy framework, Bank of Canada Deputy Governor Lawrence Schembri said. Canada's inflation report for May is due on Wednesday. The price of oil, one of Canada's major exports, fell after weaker Chinese economic figures fanned fears of lower worldwide oil demand. U.S. crude oil futures settled 1.1% lower at $51.93 a barrel. Canada looks set this week to approve a hotly debated plan to expand an oil pipeline, people familiar with the process told Reuters, but the move is unlikely to help Prime Minister Justin Trudeau rebuild flagging support ahead of an October election. Foreign investors sold a net C$12.80 billion in Canadian securities in April, led by equities, following a revised C$1.56 billion total divestment in March, Statistics Canada said. Canadian government bond prices were lower across much of a flatter yield curve, with the two-year down 3 Canadian cents to yield 1.398% and the benchmark 10-year falling 8 Canadian cents to yield 1.444%. (Reporting by Fergal Smith; Editing by Susan Thomas and Peter Cooney)

CANADA FX DEBT-Loonie hits 8-day low as U.S. data boosts greenback

14 Jun 2019

(Adds dealer quotes and details on activity, updates prices) * Canadian dollar falls 0.6% against the greenback * Loonie touches its weakest level since June 6 at 1.3424 * Canadian dollar declines 1.1% for the week * Canadian bond prices edge higher across much of the yield curve By Fergal Smith TORONTO, June 14 The Canadian dollar fell to a one-week low against its U.S. counterpart on Friday as U.S. data suggesting a pick-up in consumer spending boosted the greenback. The U.S. dollar rose against a basket of major currencies after encouraging U.S. retail sales data for May eased fears that the U.S. economy is slowing sharply, ahead of the Federal Reserve's meeting next week. "It's a U.S. dollar move across the board ... the buying started right after that data came out," said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets. "I think what this is providing is an opportunity for Canadian companies that did not hedge some U.S. dollar cash flows a few weeks ago, when we were trading at about 1.3550, to step in here because the narrative is shifting around the Federal Reserve," Schruder said. The Canadian dollar could benefit if the Bank of Canada cuts interest rates less than the Federal Reserve. Money markets see about a 70% chance of a Bank of Canada rate cut by December, while they are pricing in at least two cuts over the same period by the Fed. At 2:50 p.m. (1850 GMT), the Canadian dollar was trading 0.6% lower at 1.3413 to the greenback, or 74.55 U.S. cents, its biggest decline since March 6. The currency, which fell 1.1% for the week, touched its weakest level since June 6 at 1.3424. The decline for the loonie came as global stocks were pressured by more signs of slowdown in Chinese industry and as the long-feared hit to global growth from U.S. President Donald Trump's trade war crystallized in slashed sales forecast from chipmaker Broadcom. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt if a trade war between the United States and China slows the global flow of trade or capital. Oil rose, paring this week's decline, after attacks on two oil tankers in the Gulf of Oman this week raised concerns about potential supply disruptions. U.S. crude oil futures settled 0.4% higher at %52.51 a barrel. Canadian government bond prices were slightly higher across much of the yield curve, with the two-year up 0.5 Canadian cent to yield 1.385% and the 10-year rising 5 Canadian cents to yield 1.445%. (Reporting by Fergal Smith Editing by Nick Zieminski and Sandra Maler)

CANADA FX DEBT-Canadian dollar pares this week's decline as oil rallies

13 Jun 2019

(Adds dealer quotes and details throughout; updates prices) * Canadian dollar rises 0.1% against the greenback * Loonie gains for first time since Friday * Price of U.S. oil increases 2.2% * Canadian bond prices rise across a steeper yield curve By Fergal Smith TORONTO, June 13 The Canadian dollar strengthened against its U.S. counterpart on Thursday after a three-day run of declines, as oil prices rallied and expectations for Federal Reserve interest rate cuts were boosted by tame U.S. inflation data. The price of oil, one of Canada's major exports, rose after a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil passes. U.S. crude oil futures settled 2.2% higher at $52.28 a barrel. "The market right now is really focusing on oil ... whenever you have that positive development, it normally provides good support for the Canadian dollar," said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc. The loonie has also benefited this month from "dovish comments" by Federal Reserve officials, Richardson said. U.S. Treasury yields fell on Thursday as data showed U.S. import prices declined by the most in five months, the latest indication of muted inflation pressures, which could strengthen the case for the Fed to cut interest rates this year. At 3:55 p.m. (1955 GMT), the Canadian dollar was trading 0.1% higher at 1.3332 to the greenback, or 75.01 U.S. cents. The currency, which has declined 0.5% this week, traded in a range of 1.3300 to 1.3342. Canadian household debt as a share of income, a measure closely watched by policymakers, slipped to 173.0% in the first quarter from 173.7% in the fourth quarter, but was still near record levels, data from Statistics Canada showed. A survey from Export Development Canada, completed in March and April, showed that Canadian exporters' confidence fell to a seven-year low amid the disruption caused by trade wars and the imposition of U.S. tariffs. The Bank of Canada has repeatedly identified the U.S.-China trade war as one of the main risks facing the economy. Canadian government bond prices were higher across a steeper yield curve in sympathy with U.S. Treasuries. The two-year rose 8.5 Canadian cents to yield 1.402% and the 10-year was up 39 Canadian cents to yield 1.455%. That left the 10-year yield near last week's two-year low of 1.410%. (Reporting by Fergal Smith; Editing by Peter Cooney)

CANADA FX DEBT-Loonie weakens as oil slides, trade war fears grow

12 Jun 2019

(Adds strategist quotes and details throughout, updates prices) * Canadian dollar trades in a range of 1.3274 to 1.3335 * Price of U.S. oil falls 4% * Canadian bond prices rise across steeper yield curve By Fergal Smith TORONTO, June 12 The Canadian dollar weakened against its U.S. counterpart on Wednesday, extending its pull back from Monday's three-month high, as oil prices tumbled and investors worried that the trade dispute between the United States and China could worsen. At 3:14 p.m. (1914 GMT), the Canadian dollar was trading 0.4% lower at 1.3333 to the greenback, or 75.00 U.S. cents. The currency, which touched on Monday its strongest level since March 1 at 1.3226, traded in a range of 1.3274 to 1.3335. "The Canadian dollar had an incredible run last week and it has given back a small portion of that as oil prices fall and the market focuses back on the risk of an escalating trade war," said Adam Button, chief currency analyst at ForexLive. Wall Street's main indexes dipped over worries of a prolonged U.S.-China trade war after Washington toughened its stance. Canada runs a current account deficit and is a major exporter of commodities, including oil, so its economy could be hurt by a slowdown in the global flow of trade or capital. The price of oil was weighed down by another unexpected rise in U.S. crude inventories and by a dimming outlook for global oil demand. U.S. crude oil futures settled 4% lower at $51.14 a barrel. "If oil prices fall below $50 the pain for the Canadian dollar really begins to kick in," because at that point investors will worry about the ability of oil companies to make money, Button said. Meanwhile, U.S. consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy could increase pressure on the Federal Reserve to cut interest rates this year. The loonie has benefited this month from expectations that the Bank of Canada will cut interest rates less than the Fed does. Money markets see about a 60% chance of a Bank of Canada interest rate cut by December, while they are pricing in at least two cuts over the same period by the Fed. Canadian government bond prices were higher across a steeper yield curve in sympathy with U.S. Treasuries. The two-year rose 5.5 Canadian cents to yield 1.449% and the 10-year climbed 26 Canadian cents to yield 1.500%. On Tuesday, the 10-year yield touched its highest intraday in 11 days at 1.543%. (Reporting by Fergal Smith Editing by Nick Zieminski and James Dalgleish)

CANADA FX DEBT-C$ dips as rally on expected Fed easing pauses

11 Jun 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar falls 0.1% against the greenback * Price of U.S. oil rises 1 cent * Canada's 10-year yield touches an 11-day high at 1.543% By Fergal Smith TORONTO, June 11 The Canadian dollar weakened against its U.S. counterpart on Tuesday, with the currency extending its pullback from a three-month high the day before, as a rally driven by more dovish expectations for the Federal Reserve lost some momentum. At 4:02 p.m. (2002 GMT), the Canadian dollar was trading 0.1% lower at 1.3284 to the greenback, or 75.28 U.S. cents. The currency, which on Monday touched its strongest intraday level since March 1 at 1.3226, traded in a range of 1.3251 to 1.3309. The loonie's rally ran "out of steam" ahead of 1.32 after the currency had benefited from a sharp rise in expectations for Federal Reserve interest rate cuts, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. More gains for the Canadian dollar could come if the Fed were to signal at next week's interest rate announcement that it is going to ease in July and if oil prices start to recover, Anderson said. Money markets see a greater than 80% chance that the Fed will cut interest rates as soon as next month and are also expecting at least one further cut before the end of the year. The decline for the loonie came as U.S. President Donald Trump defended the use of tariffs as part of his trade strategy, while China vowed a tough response if the United States insists on escalating trade tensions amid ongoing negotiations. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of trade or capital. The price of oil was little changed as concerns about a global economic slowdown offset expectations that OPEC and its allies will extend their supply curbs. U.S. crude oil futures settled 1 cent higher at $53.27 a barrel. Canadian government bond prices edged lower across a flatter yield curve, with the two-year down 3.5 Canadian cents to yield 1.479% and the 10-year falling 6 Canadian cents to yield 1.528%. The 10-year yield touched its highest intraday since May 31 at 1.543%. (Reporting by Fergal Smith; Editing by Peter Cooney)

CANADA FX DEBT-C$ posts 11-week high as jobs gain supports BoC's optimism

07 Jun 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.6% against the greenback * Canada adds 27,700 jobs in May * Loonie gains 1.8% for the week * Canada-U.S. 2-year spread touches narrowest since March 2018 By Fergal Smith TORONTO, June 7 The Canadian dollar strengthened to an 11-week high against its U.S. counterpart on Friday as domestic data showing a record low unemployment rate supported the Bank of Canada's view that the economy will pick up. Canada added a higher-than-expected 27,700 net new jobs in May, which followed a record gain of 106,500 positions in April, and the unemployment rate dipped to a record low of 5.4%, official data showed. "I think the fundamental story for Canada looks ok," said Amo Sahota, director at Klarity FX in San Francisco. Bank of Canada Governor Stephen Poloz "keeps telling us don't worry guys, the second half of the year we are going to be better ... I think this week's data will make him look good, I think it justifies his call at the moment," Sahota said. The Bank of Canada has said that a slowdown in the domestic economy was temporary. At 4:01 p.m. (2001 GMT), the Canadian dollar was trading 0.6% higher at 1.3280 to the greenback, or 75.30 U.S. cents. The currency touched its strongest level since March 20 at 1.3263. For the week, the loonie was up 1.8%, its strongest performance since January. Still, speculators have raised their bearish bets on the Canadian dollar for the first time in three weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of June 4, net short positions had increased to 41,759 contracts from 39,423 in the prior week. Investors worry that potential U.S. tariffs on Mexican goods could undermine chances of a new North American trade deal coming into force. Canada sends about 75% of its exports, including oil, to the United States. The price of oil climbed further from five-month lows hit this week, after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June. U.S. crude oil futures settled 2.7% higher at $53.99 a barrel. Canadian government bond prices edged lower across much of the yield curve, with the 10-year falling 1 Canadian cent to yield 1.460%. The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 4.8 basis points to a spread of 45.1 basis points in favor of the U.S. bond, its narrowest gap since March last year. (Reporting by Fergal Smith; Editing by Sandra Maler)

CANADA FX DEBT-C$ notches 7-week high as jobs gain supports BoC economic outlook

07 Jun 2019

* Canadian dollar rises 0.5% against the greenback * Canada adds 27,700 jobs in May * Loonie is on track to climb 1.7% for the week * Canada-U.S. 2-year spread touches narrowest since March 2018 By Fergal Smith TORONTO, June 7 The Canadian dollar strengthened to a seven-week high against its U.S. counterpart on Friday, boosted by domestic data showing a record low unemployment rate that could give the Bank of Canada some confidence in its rosy outlook for the economy. Canada added a higher-than-expected 27,700 net new jobs in May, which followed a record gain of 106,500 positions in April, and the unemployment rate dipped to a record low of 5.4%, official data showed. "The labor market looks like it is holding up, so I think they (the Bank of Canada) are very comfortable with policy rates where they are," said Andrew Kelvin, chief Canada strategist at TD Securities. "The bank has, I think, signaled with a fair bit of conviction that they are very comfortable with the Canadian outlook." The Bank of Canada has said that a slowdown in the domestic economy was temporary. But chances of an interest rate cut this year by the central bank stayed high, at about 85%, after the Canadian jobs report, with data from the United States showing a sharp slowdown in U.S. job growth. At 9:32 a.m. (1332 GMT), the Canadian dollar was trading 0.5% higher at 1.3295 to the greenback, or 75.22 U.S. cents. The currency, which was on track to rise 1.7% for the week, touched its strongest intraday level since April 17 at 1.3290. U.S.-Mexico migration talks were set to resume on Friday as Mexican officials continue their push to reach an agreement that would avert U.S. tariffs set to take effect next week. Investors worry that the tariffs could undermine chances of a new North American trade deal coming into force. Canada sends about 75% of its exports, including oil, to the United States. The price of oil, one of Canada's major exports, climbed further from five-month lows hit this week amid signs that OPEC and other producers could extend their output reduction deal. U.S. crude oil futures were up 0.7% at $52.97 a barrel. Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 6 Canadian cents to yield 1.349% and the 10-year climbed 33 Canadian cents to yield 1.424%. The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 6.4 basis points to a spread of 43.5 basis points in favor of the U.S. bond, its narrowest gap since March last year. (Reporting by Fergal Smith Editing by Chizu Nomiyama)

CANADA FX DEBT-C$ climbs to 2-week high as trade data boosts economic outlook

06 Jun 2019

(Adds strategist quote and details throughout; updates prices) * Canadian dollar rises 0.3% against the greenback * Canada posts narrowest trade deficit in six months * Price of U.S. oil increases 1.8% * Canadian bond prices fall across a flatter yield curve By Fergal Smith TORONTO, June 6 The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Thursday, as the greenback broadly declined and trade data added to evidence that Canada's economy is picking up. Rising exports and falling imports helped shrink Canada's trade deficit in goods in April to C$966 million, Statistics Canada said, in the latest sign the economy is recovering from a slowdown. April's trade deficit was the smallest since October last year. "I think in general the data from Canada has been supportive (of the Canadian dollar), even the latest GDP figures, which showed solid domestic demand and a good March monthly GDP, showing the economy perhaps regained momentum going into Q2," said Eric Viloria, an FX strategist at Crédit Agricole CIB. The pace of purchasing activity in Canada showed steady growth in May as a measure of employment rose to a nine-month high, according to Ivey Purchasing Managers Index data. Canada's jobs report for May is due on Friday. The U.S. dollar , which has been pressured this week by speculation that the Federal Reserve would cut interest rates, lost ground against a basket of major currencies. The decline for the greenback came as the ECB refrained from hinting at an interest rate cut, boosting the euro . At 2:57 p.m. (1857 GMT), the Canadian dollar was trading 0.3% higher at 1.3371 to the greenback, or 74.79 U.S. cents. The currency touched its strongest level since May 22 at 1.3360. Still, the Canadian dollar is likely to strengthen less than previously expected against its U.S. counterpart over the coming year, because of more attractive valuations and better prospects for return in other currencies, a Reuters poll showed. Gains for the loonie on Thursday came as U.S. stocks got a boost from a report that the United States is considering a delay to the imposition of tariffs on Mexican products that President Donald Trump has threatened to put in place on Monday. Investors worry that the tariffs could undermine chances of a new North American trade deal coming into force. Canada sends about 75% of its exports, including oil, to the United States. The price of oil rebounded from a five-month low in the previous session. U.S. crude oil futures settled 1.8% higher at $52.59 a barrel. Canadian government bond prices were lower across much of a flatter yield curve, with the 10-year falling 13 Canadian cents to yield 1.461%. (Reporting by Fergal Smith; Editing by David Gregorio and Sandra Maler)

Loonie's upside prospects dwindle; other currencies look better: Reuters poll

06 Jun 2019

TORONTO The Canadian dollar is likely to strengthen less against its U.S. counterpart over the coming year than previously expected, because of more attractive valuations and better prospects for return in other currencies, a Reuters poll showed.

CANADA FX DEBT-Loonie retreats from 2-week high as oil prices tumble

05 Jun 2019

(Adds strategist quotes and details on activity; updates prices) * Canadian dollar falls 0.2% against the greenback * Loonie touches its strongest level since May 22 at 1.3363 * Price of U.S. oil decreases 3.4% * Canada's 10-year yield hits a two-year low at 1.410% By Fergal Smith TORONTO, June 5 The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from an earlier two-week high as oil prices fell and the greenback halted this week's decline. At 4:13 p.m. EDT (2013 GMT), the Canadian dollar was trading 0.2% lower at 1.3419 to the greenback, or 74.52 U.S. cents. The currency touched its strongest intraday level since May 22 at 1.3363. The turn lower for the loonie was due to a rebound in the U.S. dollar after data showed U.S. services sector activity picked up in May and due to lower oil prices, said Daniel Katzive, head of FX strategy North America at BNP Paribas in New York. The U.S. dollar , which has been pressured this week by speculation that the Federal Reserve would cut interest rates, gained ground against a basket of major currencies. The price of oil, one of Canada's major exports, fell to its lowest since January after U.S. crude inventories unexpectedly surged, adding to concerns about slowing global growth. U.S. crude oil futures settled 3.4% lower at $51.68 a barrel. Canadian labor productivity grew by 0.3% in the first quarter, reflecting a decline in hours worked for the first time in seven consecutive quarters, while business output remained virtually unchanged, Statistics Canada said. Economists worry that weak productivity growth in Canada could hold back growth in its trade-dependent economy. White House trade adviser Peter Navarro said U.S. tariffs on Mexican goods may not have to take effect because Washington now has Mexico's attention on the issue. The tariffs could undermine chances of a new North American trade deal coming into force. Canada sends about 75% of its exports to the United States. Canadian government bond prices were higher across the yield curve, with the two-year up 10 Canadian cents to yield 1.338% and the 10-year rising 32 Canadian cents to yield 1.443%. The 10-year yield touched its lowest intraday since June 2017 at 1.410%. (Reporting by Fergal Smith; editing by Diane Craft)

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