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Fergal Smith

CANADA FX DEBT-C$ retreats from 4-week high as market distrusts inflation uptick

17 Apr 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar near flat against the greenback * Annual inflation rate edges up to 1.9% in March * Trade deficit falls in February to C$2.9 billion * Canadian bond prices fall across the yield curve By Fergal Smith TORONTO, April 17 The Canadian dollar was little changed against its U.S. counterpart on Wednesday, pulling back from an earlier four-week high as investors doubted that a pick-up in domestic underlying inflation would be sustained. Canada's annual inflation rate edged up to 1.9% in March from 1.5% in February, while two out of three of the Bank of Canada's measures of core inflation edged up into the 2.0% range, Statistics Canada data indicated. The loonie notched its strongest intraday level since March 20 at 1.3275 after the data, but then gave back all its gains. "The market is skeptical that there is a true uptick in core inflation," said Adam Button, chief currency analyst at ForexLive. "Looking forward, if the acceleration in core inflation continues the market will have to change course." A shift in sentiment could see expectations unwind for an interest rate cut this year, Button said. Chances of a policy easing by December fell to 20% from about 25% before the data, the overnight index swaps market indicated. Separate data from Statistics Canada showed Canada's trade deficit declined for a second straight month in February, falling slightly to C$2.9 billion, after reaching a record high of C$4.8 billion in December 2018. At 4:02 p.m. (2002 GMT), the Canadian dollar was trading nearly unchanged at 1.3346 to the greenback, or 74.93 U.S. cents. The pullback for the loonie from an earlier four-week high came as the price of oil, one of Canada's major exports, turned lower. U.S. crude oil futures settled down 0.5% at $63.76 a barrel as U.S. government data showed inventories drew down less than an industry report had suggested on Tuesday, offsetting upbeat economic reports from China. A right-of-center party swept to power in Canada's main oil-producing province of Alberta on Tuesday and attacked Prime Minister Justin Trudeau's efforts to fight climate change, raising tension just months ahead of a federal election. Canadian government bond prices were lower across the yield curve, with the two-year down 4.5 Canadian cents to yield 1.658% and the 10-year falling 14 Canadian cents to yield 1.799%. The gap between Canada's two-year yield and its U.S. equivalent narrowed by 3.4 basis points to a spread of 74.6 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; Editing by Bill Trott and Grant McCool)

CANADA FX DEBT-C$ climbs off 11-day low as oil prices rise

16 Apr 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.1% against the greenback * Price of U.S. oil increases 1% * Canadian factory sales fall 0.2% in February * Canadian government bond prices fall across the yield curve By Fergal Smith TORONTO, April 16 The Canadian dollar edged higher against its U.S. counterpart on Tuesday, rebounding from an earlier 11-day low as higher oil prices offset weaker-than-expected domestic manufacturing data. At 3:09 p.m. (1909 GMT), the Canadian dollar was trading 0.1% higher at 1.3352 to the greenback, or 74.90 U.S. cents. The currency touched its weakest intraday since April 5 at 1.3403. The price of oil, one of Canada's major exports, rose as fighting in Libya and falling Venezuelan and Iranian exports raised concerns over tightening global supply. U.S. crude oil futures settled 1% higher at $64.05 a barrel. "Higher oil prices are helping the Canadian dollar," said Eric Viloria, an FX strategist at Crédit Agricole CIB. "They offered some cushion surrounding the weaker manufacturing sales." Canadian factory sales were down by 0.2% in February from January on lower sales of motor vehicles, as well as wood products, Statistics Canada said. Analysts had forecast no change. On Monday, a Bank of Canada quarterly survey showed that Canadian business sentiment has turned slightly negative, weighed by a weak energy sector, a housing slowdown and global trade tensions. "What we have seen is that there is still some soft Canadian data ... it would need to show some more meaningful improvement before the Canadian dollar can break out of its recent range," Viloria said. The loonie was nearly unchanged for the month of April after having climbed 2.2% since the start of 2019. Canada's inflation report for March and February trade data are due on Wednesday. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as investors favored riskier assets, such as stocks. The two-year fell 4.5 Canadian cents to yield 1.631% and the 10-year was down 23 Canadian cents to yield 1.783%. The Canadian province of Ontario, the world's biggest sub-sovereign debtor, faces an uphill task to balance the books in the coming years after its government failed to deliver a "trophy" cost saving in last week's budget, bond investors say. (Reporting by Fergal Smith; Editing by Steve Orlofsky and Sandra Maler)

Bond investors see snag in Ontario's deficit reduction plan

16 Apr 2019

TORONTO, April 16 The Canadian province of Ontario, the world's biggest sub-sovereign debtor, faces an uphill task to balance the books in the coming years after its government failed to deliver a "trophy" cost saving in last week's budget, bond investors say.

CANADA FX DEBT-C$ slides as rate cut bets climb on weaker business sentiment

15 Apr 2019

(Adds strategist comment and details throughout; updates prices) * Canadian dollar falls 0.4% against the greenback * BoC survey shows business sentiment turning negative * Canadian home sales increase 0.9% month-over-month in March * Price of U.S. oil falls 0.8% * Canadian government bond prices rise across yield curve By Fergal Smith TORONTO, April 15 The Canadian dollar weakened against its U.S. counterpart on Monday, as domestic data showing softer business sentiment triggered increased bets on a Bank of Canada interest rate cut this year. Canada's weak energy sector, a housing slowdown and global trade tensions are weighing on business sentiment, which has turned slightly negative, according to a Bank of Canada quarterly survey. The weaker survey "strongly suggests the BoC will be on hold through the rest of this year, though the risks are tilted toward a cut, should a negative shock hit," Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets, said in a note. Chances of a rate cut by December doubled to about 40% after the data, the overnight index swaps market indicated. Adding to headwinds for the loonie, the price of oil, one of Canada's major exports, fell after Russia's finance minister said Russia and OPEC may decide to boost production to fight for market share with the United States, where output remains at record highs. U.S. crude oil futures settled 0.8% lower at $63.40 a barrel. At 3:44 p.m. (1944 GMT), the Canadian dollar was trading 0.4% lower at 1.3372 to the greenback, or 74.78 U.S. cents. The currency, which rose 0.5% last week, traded in a range of 1.3298 to 1.3390. Canadian home sales rose 0.9% month-over-month in March, edging higher after a sharp drop in the previous month, the Canadian Real Estate Association said on Monday. Canadian government bond prices were higher across the yield curve, with the two-year up 6.5 Canadian cents to yield 1.603% and the 10-year rising 28 Canadian cents to yield 1.750%. The gap between Canada's two-year yield and its U.S. equivalent widened by 2.6 basis points to a spread of 78.6 basis points in favor of the U.S. bond. (Reporting by Fergal Smith; Editing by Susan Thomas and Peter Cooney)

CANADA FX DEBT-C$ rallies as U.S. stocks approach record highs

12 Apr 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar rises 0.4% against the greenback * Price of U.S. oil increases 0.5% * Loonie ends up 0.5% for the week * Canadian bond prices fall across a steeper yield curve By Fergal Smith TORONTO, April 12 The Canadian dollar strengthened against its U.S. counterpart on Friday, adding to this week's gains as oil prices rose and U.S. stocks climbed back to near record highs. The S&P 500 moved within a percent of September's record closing high after the largest U.S. bank soothed worries that the first-quarter earnings season would pour cold water on Wall Street's big rally back from last year's slump. Canada is a major exporter of commodities, including oil, so its currency tends to benefit from the positive signal higher stock prices send about the outlook for the global economy. "On the back of (U.S.) dollar weakness and a better risk tone, the loonie is getting a little bit of a bid," said Erik Nelson, a currency strategist at Wells Fargo. The U.S. dollar declined against a basket of major currencies, while oil prices rose as involuntary supply cuts from Venezuela, Libya and Iran supported perceptions of a tightening market. U.S. crude oil futures settled 0.5% higher at $63.89 a barrel. At 3:58 p.m. (1958 GMT), the Canadian dollar was trading 0.4% higher at 1.3329 to the greenback, or 75.02 U.S. cents. The currency, which was up 0.5% for the week, traded in a range of 1.3313 to 1.3386. The loonie made ground despite data showing Canadian home prices fell in March for the sixth straight month. Data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed that speculators have cut their bearish bets on the Canadian dollar. As of April 9, net short positions had dipped to 43,202 contracts from 44,323 in the prior week. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 8.5 Canadian cents to yield 1.633% and the 10-year was down 54 Canadian cents to yield 1.784%, its highest yield since March 12. (Reporting by Fergal Smith; editing by Grant McCool)

UPDATE 1-Canada’s Ontario aims to slay deficit in five years as it limits spending

11 Apr 2019

TORONTO, April 11 Ontario's Conservative government, presenting its first budget on Thursday, forecast a smaller deficit for the Canadian province in the current fiscal year and a return to balance by 2023-24 as it disclosed plans to reverse the growth in spending.

CANADA FX DEBT-C$ holds near 3-week high as oil rises, Fed signals patience

10 Apr 2019

TORONTO, April 10 The Canadian dollar edged higher against its U.S. counterpart on Wednesday, holding near a three-week high reached the day before as oil prices rose and minutes from the Federal Reserve's latest meeting signaled patience on raising interest rates further.

CANADA FX DEBT-C$ pulls back from 3-week high as tariff tensions weigh

09 Apr 2019

(Recasts throughout) * Canadian dollar dips 0.1% against the greenback * Loonie touches its strongest intraday since March 21 at 1.3285 * Currency is up 0.2% since the start of the month * Canadian bond prices rise across much of the yield curve By Fergal Smith TORONTO, April 9 The Canadian dollar edged lower against the greenback on Tuesday, pulling back from an earlier near three-week high, as increased tariff tensions added to the list of uncertainties discouraging investors from taking bets on the currency. Wall Street and the price of oil, one of Canada's major exports, fell as U.S. President Donald Trump said he would impose tariffs on $11 billion of European goods and after the International Monetary Fund cut its global economic growth forecasts. U.S. crude oil futures settled 0.7% lower at $63.98 a barrel. "There are just so many factors that are keeping investors on the sidelines," said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets. The U.S.-China trade dispute, the potential for a messy Brexit and inversion of the U.S. and Canadian yield curves have all worried investors in recent weeks. "Given the dovish stance by all the central banks recently I think investors are looking for signs that maybe the economy will do slightly better and maybe central banks will be forced to change their stance," Jespersen said. The Bank of Canada has been one of the central banks to turn more dovish. It has raised interest rates 125 basis points since July 2017, but data from the overnight index swaps market shows investors have shifted this year from expecting further tightening to seeing about a 40% chance of a cut by December. At 3:32 p.m. (1932 GMT), the Canadian dollar was trading 0.1% lower at 1.3325 to the greenback, or 75.05 U.S. cents. The currency touched its strongest intraday level since March 21 at 1.3285. Despite the decline, the loonie was up 0.2% since the start of the month. It has advanced in 11 of the last 13 Aprils, a winning streak strategists link to seasonal vitality in stocks and energy products. Canadian government bond prices were higher across much of the yield curve in sympathy with U.S. Treasuries. The two-year rose up 2.5 Canadian cents to yield 1.602% and the 10-year was up 7 Canadian cents to yield 1.727%. (Reporting by Fergal Smith Editing by Tom Brown)

CANADA FX DEBT-C$ beats most G10 rivals as oil rallies, housing starts rebound

08 Apr 2019

(Adds strategist quotes and details throughout; updates prices) * Canadian dollar gains 0.6% against the greenback * Canadian housing starts climb 15.8% in March * Price of U.S. oil rises 2.1% * Canadian bond prices fall across steeper yield curve By Fergal Smith TORONTO, April 8 The Canadian dollar strengthened against its U.S. counterpart on Monday, performing better than most other G10 currencies as oil prices climbed to their highest this year and domestic data showed a 15.8% jump in March housing starts. The price of oil, one of Canada's major exports, rose to a five-month high on expectations of tightening global supplies. U.S. crude oil futures settled 2.1 percent higher at $64.40 a barrel. "For today it is very much an oil story," said Eric Theoret, a currency strategist at Scotiabank. "When you have got oil prices hitting fresh 2019 highs it is important from a terms of trade perspective." Rising export prices can help boost a country's terms of trade, making its economy wealthier. Canadian housing starts climbed in March to a seasonally adjusted annualized rate of 192,527 units after slowing to a revised 166,290 units in February. At 3:14 p.m. (1914 GMT), the Canadian dollar was trading 0.6% higher at 1.3312 to the greenback, or 75.12 U.S. cents. Among G10 currencies, only the Norwegian krone , which is also linked to the price of oil, performed better. The loonie, which touched on Friday a one-week low at 1.3403, traded in a range of 1.3305 to 1.3386. Gains for the loonie came as the U.S. dollar lost ground against a basket of major currencies. Investors squared positions before a European Central Bank meeting this week, boosting the euro. Data on Friday from the U.S. Commodity Futures Trading Commission and Reuters calculations showed that speculators have raised their bearish bets on the Canadian dollar. As of April 2, net short positions had increased to 44,323 contracts from 39,571 in the prior week. More than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding. Canadian government bond prices were lower across a steeper yield curve, with the two-year down 3.5 Canadian cents to yield 1.611% and the 10-year falling 25 Canadian cents to yield 1.729%. The 10-year yield touched its highest intraday since March 20 at 1.732%. (Reporting by Fergal Smith; Editing by David Gregorio and Marguerita Choy)

CANADA FX DEBT-C$ hits one-week low as jobs fall backs more dovish BoC

05 Apr 2019

(Adds strategist quote and details; updates prices) * Canadian dollar dips 0.3% against the greenback * Canada sheds 7,200 jobs in March * Loonie touches its weakest since March 29 at 1.3403 * Price of U.S. oil rises 1.6% * Canadian bond prices edge lower across much of the yield curve By Fergal Smith TORONTO, April 5 The Canadian dollar weakened to a one-week low against its U.S. counterpart on Friday as domestic data showing an unexpected decline in jobs diminished prospects of the Bank of Canada turning more upbeat on the economy. A six-month string of job gains, including blockbuster increases in January and February, had helped bolster investor sentiment for the loonie, offsetting weak gross domestic product data and a slowdown in the global economy that could hurt Canada's exports. But that sequence ended in March, as Canada shed 7,200 jobs. Analysts in a Reuters poll had forecast a marginal gain of 1,000. "The assumption that strong employment growth would return the Bank of Canada to a hawkish path was disappointed and traders went short on the Canadian dollar," said Karl Schamotta, director global markets strategy at Cambridge Global Payments. Perceived chances of an interest rate cut this year from the central bank nudged up to 40% from 38% before the data, the overnight index swaps market indicated. At 2:36 p.m. (1836 GMT), the Canadian dollar was trading 0.3% lower at 1.3392 to the greenback, or 74.67 U.S. cents. The currency, which was also down 0.3% for the week, touched its weakest since March 29 at 1.3403. The loonie has advanced 1.9% since the start of the year even as it has lost ground since February, making it the second best performing currency in the G10 after sterling. Still, strategists see little upside for the Canadian dollar over the coming months, cutting their bullish forecasts for the currency as worries about the global economy boost demand for higher-yielding U.S. dollars, a Reuters poll showed. The U.S. dollar rose on Friday against a basket of major currencies, helped by data showing better-than-expected U.S. job growth. The U.S. data was also supportive of the price of oil, one of Canada's major exports, as it tempered fears that global crude demand might weaken. U.S. crude oil futures settled 1.6% higher at $63.08 a barrel. Canadian government bond prices edged lower across much of the yield curve, with the two-year price down 2 Canadian cents to yield 1.598% and the 10-year falling 3 Canadian cents to yield 1.704%. (Reporting by Fergal Smith in Toronto Editing by James Dalgleish)

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