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Fergal Smith

Canada's yield curve inversion turns up pressure on central bank to cut rates

15 Aug 2019

TORONTO Inversion of Canada's yield curve by the most in nearly two decades is threatening to coerce the Bank of Canada to cut interest rates rather than risk an economic downturn, portfolio managers said on Wednesday.

ANALYSIS-Canada's yield curve inversion turns up pressure on central bank to cut rates

15 Aug 2019

TORONTO, Aug 15 Inversion of Canada's yield curve by the most in nearly two decades is threatening to coerce the Bank of Canada to cut interest rates rather than risk an economic downturn, portfolio managers said on Wednesday.

Canada dollar outlook brightens with stable domestic economy: Reuters poll

08 Aug 2019

TORONTO The Canadian dollar will strengthen against its U.S. counterpart over the coming year, recouping ground lost since July, as Canada's economy stays strong enough to withstand global trade uncertainty, a Reuters poll predicted.

Canadian debt binge clouds economic outlook as consumers recoil

31 Jul 2019

TORONTO The high debt loads and depleted savings of Canadians look set to crimp their spending for as long as decades, economists say, with consumers already scaling back after borrowing costs began to rise in 2017.

Loonie rally tests Bank of Canada resolve to diverge from global peers

24 Jul 2019

TORONTO, July 24 The Canadian dollar, this year's best performing G10 currency, is threatening to ruin the Bank of Canada's plan to sit out global interest rate cuts, after a rally since May that risks undercutting an expected pickup in exports.

CANADA FX DEBT-C$ retreats from 9-month high as consumers lose their pep

19 Jul 2019

(Adds market player quotes and details; updates prices) * Canadian dollar falls 0.3% against the greenback * Canadian retail sales decline 0.1% in May * U.S. oil futures increase by 0.6% * Canada-U.S. 2-year spread widens by 3.9 basis points By Fergal Smith TORONTO, July 19 The Canadian dollar weakened against its U.S. counterpart on Friday, pulling back from a near nine-month high hit earlier in the day, as domestic data showed a surprise decline in May retail sales and the greenback broadly climbed. The value of Canadian retail trade dipped by 0.1% versus an estimated 0.3% increase, as unusually bad weather hit sales of food, drink and clothing. "The report casts some doubt on the resiliency of the consumer sector to the ongoing parade of worrisome geopolitical and trade developments," Ryan Brecht, a senior economist at Action Economics, said in a research note. Canada's economy has showed signs of picking up in the second quarter after a slowdown at the turn of the year, even as a more uncertain outlook for trade has weighed on the global economy. The U.S. dollar rose against a basket of currencies as fears of a larger-than-expected 50-basis-point interest rate cut in July abated after the New York Federal Reserve downplayed dovish comments from its president on Thursday. "There has been a generalized rebound in the dollar and Canada has been affected by that, too," said Alvise Marino, a foreign exchange strategist at Credit Suisse in New York. At 4:10 p.m. (2010 GMT), the Canadian dollar was trading 0.3% lower at 1.3060 to the greenback, or 76.57 U.S. cents. The currency's weakest level of the session was 1.3110, while it touched its strongest since Oct. 25, at 1.3016. For the week, the loonie was down 0.2%. The Canadian dollar lost ground on Friday even as the price of oil, one of Canada's major exports, rose. U.S. crude oil futures settled 0.6% higher at $55.63 a barrel on rising tensions between the United States and Iran. Still, speculators have raised bullish bets on the currency to the highest since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of July 16, net long positions in the loonie rose to 20,964 contracts from 9,226 contracts in the prior week. Canadian government bond prices dipped across much of the yield curve, with the 10-year falling 2 Canadian cents to yield 1.502%. The 10-year yield touched its lowest intraday level since July 5 at 1.485%, while the gap between Canada's 2-year yield and its U.S. equivalent widened by 3.9 basis points to a spread of 36.2 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; additional reporting by Levent Uslu; Editing by Leslie Adler)

UPDATE 1-Bank of Canada to take over administration of reference rate for swaps

16 Jul 2019

TORONTO, July 16 The Bank of Canada announced on Tuesday its intention to become the administrator of the Canadian Overnight Repo Rate Average (CORRA), a reference rate for financial market transactions, when enhancements to CORRA take effect next year.

CANADA FX DEBT-C$ nears 8-month high on diverging U.S. and Canadian rate outlooks

11 Jul 2019

(Adds strategist quote and details throughout; updates prices) * Canadian dollar rises 0.1% against the greenback * Canadian new home prices dip 0.1% in May * Price of U.S. oil decreases 0.4% * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, July 11 The Canadian dollar firmed against its U.S. counterpart on Thursday, approaching last week's eight-month high, as investors focused on the less-dovish policy guidance coming from the Bank of Canada compared with that of the Federal Reserve. At 4:16 p.m. (2016 GMT), the Canadian dollar was trading 0.1% higher at 1.3062 to the greenback, or 76.56 U.S. cents. The currency, which last Thursday notched an eight-month high at 1.3038, traded in a range of 1.3042 to 1.3080. The outlook for the U.S. dollar remained grim after Federal Reserve Chair Jerome Powell's bleak comments on the U.S. economy, which bolstered expectations of an interest rate cut later this month. In contrast, the Bank of Canada made clear on Wednesday it had no intention of easing monetary policy even as it highlighted the risks that trade wars posed to the global economy. "If you look at the relative monetary policy, Canada versus the U.S., it still looks like divergence," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. Chances of an interest rate cut this year by the Bank of Canada were less than 35%, data from the overnight index swaps market showed. Over the same period, the market expects at least two rate cuts from the Fed. The price of oil, one of Canada's major exports, fell as OPEC forecast slower demand for its crude next year. U.S. crude oil futures settled 0.4% lower at $60.20 a barrel. New home prices in Canada declined 0.1% in May, after prices were flat for the previous three months, Statistics Canada said. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries, after data showed U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June. The two-year fell 3 Canadian cents to yield 1.602% and the 10-year was down 35 Canadian cents to yield 1.623%. (Reporting by Fergal Smith; Additional reporting by Levent Uslu; Editing by Peter Cooney)

CANADA FX DEBT-Loonie climbs as BoC policy outlook diverges from the Fed

10 Jul 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Bank of Canada leaves its policy rate on hold at 1.75% * Price of U.S. oil increases 4.5% * Canada's yield curve steepens By Fergal Smith TORONTO, July 10 The Canadian dollar strengthened against its broadly weaker U.S. counterpart on Wednesday, moving closer to last week's eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the U.S. Federal Reserve. The Bank of Canada left its benchmark interest rate on hold at 1.75% as expected and made clear it had no intention of easing monetary policy, while highlighting the risks trade wars posed to the global economy. Meanwhile, Fed Chairman Jerome Powell reinforced expectations the U.S. central bank will cut interest rates for the first time in a decade at its next monetary policy meeting later this month, saying trade uncertainties and concerns about the global outlook continued to exert pressure on the American economy. It's a "contrasting story of central bank prospects," said Shaun Osborne, chief currency strategist at Scotiabank. "It seems quite possible that we are going to get a pretty meaningful series of interest rate reductions from the Fed going forward here, and the Bank of Canada, in contrast, is suggesting that to a large extent it is going to sit this one out." While chances of an interest rate cut this year by the Bank of Canada rose to 35% from 20% before the interest rate announcement, that fell well short of expected tightening over the same period by the Fed. Investors see at least two Fed rate hikes by December. At 4:21 p.m. (2021 GMT), the Canadian dollar was trading 0.4% higher at 1.3080 to the greenback, or 76.45 U.S. cents. The currency, which last Thursday touched an eight-month high at 1.3038, traded in a range of 1.3063 to 1.3145. Adding to support for the loonie, the price of oil, one of Canada's major exports, was boosted by data showing U.S. crude inventories shrank and as major producers cut nearly a third of offshore Gulf of Mexico production ahead of an expected storm. U.S. crude oil futures settled up 4.5% at $60.43 a barrel. Canada's yield curve steepened in sympathy with the U.S. curve. The two-year rose 10.5 Canadian cents to yield 1.583% and the 10-year was flat to yield 1.584%. (Reporting by Fergal Smith; editing by David Gregorio, Bernadette Baum and Jonathan Oatis)

Bank of Canada may diverge from dovish peers as economy rebounds

10 Jul 2019

OTTAWA/TORONTO, July 10 The Bank of Canada on Wednesday looks set to raise its second-quarter economic growth forecast and stand pat on interest rates, taking a different tack from some major peers, which are signaling plans for additional stimulus.

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