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Fergal Smith

CANADA FX DEBT-Loonie slides as jobs decline shows cracks in economy's resilience

06 Dec 2019

(Adds dealer quote and details throughout, updates prices) * Canadian dollar weakens 0.6% against the greenback * Canada's economy sheds 71,200 jobs in November * Loonie ends the week up 0.1% * Canada-U.S. 2-year spread narrows by 5.9 basis points By Fergal Smith TORONTO, Dec 6 The Canadian dollar weakened against its U.S. counterpart on Friday, unwinding much of this week's gains after data showing a slump in domestic jobs suggested the economy was not as resilient as the Bank of Canada had hoped. The Canadian job market lost 71,200 net positions in November while the unemployment rate rose to 5.9%, the highest in more than a year, data from Statistics Canada showed. Analysts had forecast a gain of 10,000 jobs. On Wednesday, the Bank of Canada left its benchmark interest rate on hold at 1.75% as it cited sources of resilience in the Canadian economy. The jobs decline shows the economy is "not as resilient as maybe the bank had conveyed" but is not going to trigger an imminent cut to interest rates, said Scott Lampard, head of global markets at HSBC Bank Canada. Chances of an interest rate cut at the central bank's next meeting in January rose but were less than 20%, the overnight index swaps market indicated. The central bank said Governor Stephen Poloz will step down when his seven-year mandate expires in June, which market players had expected. At 3:51 p.m. (2051 GMT), the Canadian dollar was trading 0.6% lower at 1.3259 to the greenback, or 75.42 U.S. cents. The currency, which notched a four-week high on Thursday at 1.3158, traded in a range of 1.3173 to 1.3270. For the week, the loonie was on track to rise 0.1%. Speculators have raised their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Dec. 3, net long positions had increased to 21,471 contracts from 20,344 in the prior week. The U.S. dollar rallied on Friday against a basket of major currencies after data showed the U.S. economy created many more jobs than expected in November. The price of oil, one of Canada's major exports, rose as a meeting of OPEC and its allies agreed to deepen output cuts. U.S. crude oil futures were up 1.1% at $59.07 a barrel. Canadian government bond prices were higher across the yield curve, with the two-year up 5 Canadian cents to yield 1.654% and the 10-year rising 31 Canadian cents to yield 1.579%. The gap between Canada's two-year yield and its U.S. equivalent narrowed by 5.9 basis points to a spread of 3.9 basis points in favor of the Canadian bond. (Reporting by Fergal Smith; editing by Jonathan Oatis and Tom Brown)

UPDATE 4-End of Poloz era at Bank of Canada may open door to first female governor

06 Dec 2019

OTTAWA/TORONTO, Dec 6 Bank of Canada Governor Stephen Poloz will step down when his seven-year mandate expires in June, the bank said on Friday, and the front-runner to replace him could become the first woman to head the country's central bank.

REFILE-CANADA FX DEBT-Loonie notches 4-week high as Bank of Canada cools rate cut bets

05 Dec 2019

(Adds name of strategist's bank) * Loonie touches its strongest level since Nov. 6 at 1.3158 * Canada's trade deficit narrows to C$1.1 billion in October * Price of U.S. oil increases by 0.9% * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, Dec 5 The Canadian dollar strengthened on Thursday to its highest in nearly a month against the greenback as data showed Canada's trade deficit narrowed and a Bank of Canada official expressed confidence in the economic outlook. Bank of Canada Deputy Governor Timothy Lane said recent data supported the central bank's forecast that the economy's slowdown in the third quarter will be temporary. On Wednesday, the central bank held its overnight interest rate at 1.75% as expected and cited early signs the global economy was stabilizing. "Right now they (the Bank of Canada) seem to be okay with where the economy is," said Bipan Rai, North America Head, FX Strategy at CIBC Capital Markets. "It implies that the market shouldn't be pricing in a rate cut in January too aggressively." Chances of an interest rate cut in January have fallen to less than 10% from 20% before Wednesday's rate decision, data from the overnight index swaps market showed. Currency analysts polled by Reuters said the Canadian dollar will add to this year's gains over the coming 12 months as a potential easing of global economic risk reduces pressure on the Bank of Canada to support Canada's commodity-linked economy. The price of oil, one of Canada's major exports, gave up its earlier gains. U.S. crude oil futures were down 0.1% at $58.40 a barrel. At 3:51 p.m. (2051 GMT), the Canadian dollar was trading 0.2% higher at 1.3177 to the greenback, or 75.89 U.S. cents. The currency, which notched on Wednesday its biggest gain in three months, touched its strongest intraday level since Nov. 6 at 1.3158. The loonie has been the top-performing G10 currency this year, rising 3.6% against the greenback. Canada posted a slightly narrower trade deficit in October of C$1.1 billion as both exports and imports climbed, Statistics Canada said. Exports rose by 0.8% to C$49.9 billion, while imports were up by 0.5%. In separate data, the Ivey Purchasing Managers Index (PMI) rose in November to a three-month high at 60.0 from 48.2 in October. Canada's jobs report for November is due on Friday. Canadian government bond prices were lower across a steeper yield curve, with the benchmark 10-year falling 53 Canadian cents to yield 1.602%. The 10-year yield touched its highest intraday level since Nov. 12 at 1.624%. (Reporting by Fergal Smith; Editing by David Gregorio and Tom Brown)

Bank of Canada Governor Stephen Poloz unlikely to seek second term: economists

05 Dec 2019

OTTAWA/TORONTO Bank of Canada Governor Stephen Poloz is expected to step down when his seven-year mandate ends next June and make way for the country's first female central bank chief, according to economists and market strategists.

CANADA FX DEBT-C$ climbs to 4-week high as Bank of Canada cools rate cut bets

05 Dec 2019

* Loonie touches its strongest level since Nov. 6 at 1.3158 * Canada's trade deficit narrows to C$1.1 billion in October * Price of U.S. oil increases by 0.9% * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, Dec 5 The Canadian dollar strengthened on Thursday to its highest in nearly a month against the greenback as data showed Canada's trade deficit narrowed and a Bank of Canada official expressed confidence in the economic outlook. Bank of Canada Deputy Governor Timothy said the domestic economy remains resilient thanks to a strong labor market and stable inflation. On Wednesday, the central bank held its overnight interest rate at 1.75% as expected and cited early signs the global economy was stabilizing. "Right now they (the Bank of Canada) seem to be okay with where the economy is," said Bipan Rai, executive director and North America Head, FX Strategy. "It implies that the market shouldn't be pricing in a rate cut in January too aggressively." Chances of an interest rate cut in January have fallen to less than 10% from 20% before Wednesday's rate decision, data from the overnight index swaps market showed. Currency analysts polled by Reuters said the Canadian dollar will add to this year's gains over the coming 12 months as a potential easing of global economic risk reduces pressure on the Bank of Canada to support Canada's commodity-linked economy. The price of oil, one of Canada's major exports, rose on expectations OPEC and allied oil producers will deepen output cuts in an effort to prop up prices and prevent a glut next year. U.S. crude oil futures were up 0.9% at $58.93 a barrel. At 11:45 a.m. (1645 GMT), the Canadian dollar was trading 0.2% higher at 1.3178 to the greenback, or 75.88 U.S. cents. The currency, which notched on Wednesday its biggest gain in three months, touched its strongest intraday level since Nov. 6 at 1.3158. The loonie has been the top-performing G10 currency this year, rising 3.5% against the greenback. Canada posted a slightly narrower trade deficit in October of C$1.1 billion as both exports and imports climbed, Statistics Canada said. Exports rose by 0.8% to C$49.9 billion, while imports were up by 0.5%. In separate data, the Ivey Purchasing Managers Index (PMI) rose in November to a three-month high at 60.0 from 48.2 in October. Canada's jobs report for November is due on Friday. Canadian government bond prices were lower across a steeper yield curve, with the 10-year falling 58 Canadian cents to yield 1.607%. The 10-year yield touched its highest intraday level since Nov. 12 at 1.624%. (Reporting by Fergal Smith; Editing by David Gregorio)

Canada's trade deficit narrows in October as both exports and imports rise

05 Dec 2019

TORONTO Canada posted a slightly narrower trade deficit in October as both exports and imports climbed, Statistics Canada said, data that could support the Bank of Canada's greater confidence in the outlook for economic growth.

Loonie to extend this year's rally if global risks abate: Reuters poll

05 Dec 2019

TORONTO The Canadian dollar will add to this year's gains over the coming 12 months as a potential easing of global economic risk reduces pressure on the Bank of Canada to provide support for Canada's commodity-linked economy, a Reuters poll showed.

CANADA FX DEBT-C$ posts biggest gain in three months as rate cut bets tumble

04 Dec 2019

(Adds strategist quotes and details throughout; updates prices) * Loonie touches its strongest level since Nov. 19 at 1.3193 * Bank of Canada leaves policy rate on hold at 1.75% * Price of U.S. oil increases by 4.1% * Canada's 2-year yield moves further above U.S. equivalent By Fergal Smith TORONTO, Dec 4 The Canadian dollar strengthened to a two-week high against the greenback on Wednesday as investors cut bets that the Bank of Canada would ease interest rates over the coming months after upbeat comments by the central bank on the global economy. Canada's central bank held its overnight rate at 1.75% as expected and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook. "The Bank of Canada struck a more optimistic tone in their last monetary policy decision in 2019," said Simon Harvey, FX market analyst for Monex Europe and Monex Canada. "The market implied probability of an insurance rate cut fell dramatically." Chances of an interest rate cut by March fell to less than 20% from 35% before the rate decision, data from the overnight index swaps market indicated. At 3:44 p.m. (2044 GMT), the Canadian dollar was trading 0.8% higher at 1.3194 to the greenback, or 75.79 U.S. cents, its biggest gain since Sept. 4. The currency touched its strongest intraday level since Nov. 19 at 1.3193. The gains for the loonie came as U.S. President Donald Trump said that talks with China on an interim trade deal were going "very well," boosting Wall Street. Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade. U.S. crude oil futures jumped 4.1% to $58.40 a barrel on expectations that OPEC and allied producers would extend production curbs, and as U.S. government data showed a large drop in domestic crude stockpiles. Domestic data showed that labor productivity grew by 0.2% in the third quarter, as both hours worked and business output slowed, Statistics Canada said. Canada's trade report for October is due on Thursday and the November jobs report is due on Friday. Canadian government bond prices were lower across the yield curve, with the two-year down 15.5 Canadian cents to yield 1.638% and the 10-year falling 89 Canadian cents to yield 1.545%. Canada's 2-year yield moved 3.6 basis points further above the U.S. equivalent to a spread of 5.8 basis points in favor of the Canadian bond. (Reporting by Fergal Smith; Editing by Steve Orlofsky, Nick Zieminski and Jonathan Oatis)

CANADA FX DEBT-Canadian dollar notches two-week high as rate cut bets shrink

04 Dec 2019

(Adds details throughout and updates prices) * Loonie touches its strongest since Nov. 27 at 1.3267 * Price of U.S. oil increases by 1.7% * Canadian productivity grows by 0.2% in the third quarter * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, Dec 4 The Canadian dollar strengthened to a two-week high against the greenback on Wednesday as investors cut bets that the Bank of Canada would ease interest rates over the coming months after upbeat comments by the central bank on the global economy. The Bank of Canada held its overnight rate at 1.75% as expected and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook. "It reads fairly constructively," said Andrew Kelvin, chief Canada strategist at TD Securities. "They do bring the trade tensions into the first paragraph (of the policy statement), but that follows them suggesting that the global economy is stabilizing." Chances of an interest rate cut by March fell to about 20% from 35% before the rate decision, data from the overnight index swaps market indicated. At 10:30 a.m. (1530 GMT), the Canadian dollar was trading 0.5% higher at 1.3234 to the greenback, or 75.56 U.S. cents. The currency touched its strongest intraday level since Nov. 19 at 1.3218. The gains for the loonie came as Wall Street was boosted by a report that the United States and China were moving closer to signing a 'phase one' trade deal. Investors had worried that a deal could be delayed. Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade. U.S. crude oil futures jumped 3.7% to $58.17 a barrel ahead of an expected extension to production curbs by OPEC and its allies, with further support from industry data showing a larger than forecast drop in U.S. crude stockpiles. Canadian labor productivity grew by 0.2% in the third quarter, as both hours worked and business output slowed, Statistics Canada said. Canada's trade report for October is due on Thursday and the November jobs report is due on Friday. Canadian government bond prices were lower across the yield curve, with the two-year down 13.5 Canadian cents to yield 1.627% and the benchmark 10-year falling 79 Canadian cents to yield 1.534%. Canada's 2-year yield moved 3.5 basis points further above the U.S. equivalent to a spread of 5.7 basis points in favor of the Canadian bond. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Nick Zieminski)

CANADA FX DEBT-Loonie firms as investors see Bank of Canada on hold

03 Dec 2019

(Adds strategist quotes and details on activity; updates prices) * Canadian dollar rises 0.1% against the greenback * Price of U.S. oil increases by 0.5% * Canadian bond prices rise across a flatter yield curve By Fergal Smith TORONTO, Dec 3 The Canadian dollar edged higher against the greenback on Tuesday, as investors' worries about prospects for a trade deal between the United States and China were offset by bets that the Bank of Canada would leave interest rates on hold this week. Money markets see almost no chance of an interest rate cut by the central bank on Wednesday, after Governor Stephen Poloz said nearly two weeks ago that monetary conditions were about right given the current economic situation. Before Poloz's remarks, chances of a cut were about 25%. "One factor that has supported the Canadian dollar of late continues to be the chipping away of rate-cut expectations for the Bank of Canada," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. "The general risk-off tone has not though been very supportive, with equities taking the beating that they are taking today." "It seems to be those two factors that are at play for the currency and they are balancing themselves out pretty finely right now," Chandler said. Global stock markets fell after President Donald Trump said a trade agreement with China might have to wait until after the U.S. presidential election in November 2020, denting hopes of a resolution soon to a dispute that has weighed on the world economy. At 3:41 p.m. (2041 GMT), the Canadian dollar was trading 0.1% higher at 1.3294 to the greenback, or 75.22 U.S. cents. The currency traded in a range of 1.3283 to 1.3321. The price of oil, one of Canada's major exports, rose on expectations of output cuts from major producers. U.S. crude oil futures were up 0.5% at $56.25 a barrel. Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries, on a flight to safety. The two-year rose 10.5 Canadian cents to yield 1.554% and the 10-year was up 78 Canadian cents to yield 1.449%. (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)

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