The British pound fell to its lowest level against the U.S. dollar since 1985 before bouncing back on Monday, as investors digest the U.K. government’s plans to stimulate the economy by cutting taxes while borrowing more money to spend on programs.
Traders pushed the value of the U.K. pound down five per cent, just above $1.03 US, on Monday morning, the first trading day after Chancellor of the Exchequer Kwasi Kwarteng — the equivalent to Canada’s finance minister — unveiled the government’s plans to boost economic growth this year.
In the face of sluggish growth and sky-high inflation, the governing Conservatives plan to slash corporate and personal income taxes to their lowest level in half a century, while also borrowing more money to subsidize food and energy prices for consumers.
“The Truss administration is rebooting the old Reaganomics playbook with large, unfunded personal/corporate tax cuts expected to drive supply-side investment and spur growth,” said Bipan Rai, a foreign exchange analyst with CIBC.
The pound sold off heavily on the news, as traders expressed their doubts that the plan would work. Prior to Monday, the pound hadn’t been priced this low in U.S. dollars since Feb. 25, 1985, when it was going for about $1.05 and Margaret Thatcher was in power.
The early losses on Monday were mostly coming from trading in Asia. When trading in Europe began, the pound began to recover. By the afternoon local time in London, the pound was just barely positive on the day, after speculation grew that the Bank of England migh announce an emergency, unplanned rate hike.
In the end, that didn’t happen as the central bank merely put out a statement saying it “would not hesitate to change interest rates by as much as needed,” which caused the pound to move down to about $1.06 US again.
The seesaw ride speaks to just how uncertain investors are in the British government’s ability to rein in inflation without collapsing its already sluggish economy.
“The British have decided that going back to the 1980s on steroids is the best way to go, and clearly the market is just saying, ‘That’s not going to work,'” said Rabobank strategist Michael Every.
“The market is now treating the U.K. as if it’s an emerging market. And they’re not wrong in terms of the policy response and the naivety of thinking that boosting demand rather than supply is how you deal with a supply-side shock.”
Strong chance of a further drop
Despite Monday’s up-and-down ride, experts suggest the pound could well go lower still.
“Loose fiscal policy during a period of high inflation means that [the pound] will have to revalue lower,” Rai said.
The sell-off in the pound is increasing the likelihood that the Bank of England will have to raise interest rates even more aggressively than it has been, to staunch the bleeding. Traders are expecting an unprecedented 125-point hike when the Bank of England meets in early November.
The yield on two-year government debt priced in pounds — a bond known as a gilt — jumped by its highest level in a decade on Friday, before beating that record on Monday. Two-year British gilts are yielding more than 4.5 per cent on Monday.
A year ago, that same government debt was yielding less than 0.5 per cent.
Anything priced in pounds is sinking like a stone for many valid reasons, but the strength of the U.S. dollar certainly isn’t helping. As it often does during times of economic uncertainty, the U.S. dollar is strengthening as foreign investors flock to its perceived safety.
The loonie is trading at 73 cents US on Monday morning, its lowest level since 2020.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
