A stark change in tone from the BOC from just earlier this month caught traders by surprise, sending the Canadian Dollar tumbling across the board.
USD/CAD rates have entered a short-term reversal scenario, although the longer-term outlook remains clouded thanks to a key technical development at the end of 2019.
The Canadian Dollar endured a meaningful setback following surprise commentary at the January Bank of Canada rate decision. After striking an optimistic tone at the start of the year, noting that the Canadian economy had weathered the US-China trade war, BOC Governor Stephen Poloz effectively took a sentiment U-turn in noting that policymakers were uncertain if the recent slowdown in Canadian economic data was temporary or due to global factors.
Rate Cut Expectations Rise After Poloz Comments
Traders were caught off guard, largely expecting an anodyne BOC rate decision in light of the fact that interest rate markets were subdued: ahead of the January BOC meeting, traders were pricing in one 25-bps interest rate cut in 2020, due for October. Dour commentary coupled with a revision to the 2020 and 2021 GDP forecasts – the BOC sees the Canadian economy growing by 1.6% from 1.7% in 2020, and at 2% from 1.8% in 2021 – has provoked a material repricing of BOC rate cut odds.
Bank of Canada Interest Rate Expectations (January 22, 2020) (Table 1)
According to Canada overnight index swaps, rates markets are now pricing in an implied probability of 64% for the a 25-bps rate cut to come at the July BOC meeting – two months earlier than previously anticipated. Similarly, there is now a 35% chance that a second 25-bps rate cut comes at the October BOC meeting. At the start of 2020, rates markets did not have any interest rate cuts priced-in for 2020; this has been a dramatic escalation in a few weeks time.
USD/CAD Rate Technical Analysis: Daily Chart (January 2019 to January 2020) (Chart 1)
USD/CAD rates are working on a bullish outside engulfing bar today, suggesting further gains in the days ahead. Having cleared out the former monthly high set on January 9 at 1.3103, USD/CAD rates have a near-term bullish bias as a reversal within the congestion dating back to July transpires. A full-scale reversal within the sideways range would call for USD/CAD rates to climb back towards the mid-1.3300s over the coming sessions.
However, there are longer-term technical considerations in play that may curtail a significant reversal. The weekly chart offers important insight for traders, short-term and long-term alike.
USD/CAD Rate Technical Analysis: Weekly Chart (September 2012 to January 2020) (Chart 2)
USD/CAD rates recently rebounded from the 61.8% retracement of the 2016 high to 2018 low range at 1.3065. While the return to the consolidation in place since July suggests a reversal towards 1.3350 is possible, traders may want to curb their enthusiasm for the time being: USD/CAD remains below the rising trendline dating back to the 2012 low.
This trendline comes into play closer towards 1.3225 through the rest of this week; failure here would signify that USD/CAD’s longer-term topping efforts may still be valid. To this end, however, if USD/CAD rates are able to clear 1.3225, we would begin to consider price action in recent months a “false breakout” scenario, ultimately calling for not only a return to 1.3350, but the beginning stages of a longer-term march higher towards the 2016 high at 1.4690.
USD/CAD: Retail trader data shows 58.81% of traders are net-long with the ratio of traders long to short at 1.43 to 1. The number of traders net-long is 8.39% higher than yesterday and 1.82% higher from last week, while the number of traders net-short is 12.62% lower than yesterday and 3.02% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
TORONTO – Canada Goose Holdings Inc. trimmed its financial guidance as it reported its second-quarter revenue fell compared with a year ago.
The luxury clothing company says revenue for the quarter ended Sept. 29 totalled $267.8 million, down from $281.1 million in the same quarter last year.
Net income attributable to shareholders amounted to $5.4 million or six cents per diluted share, up from $3.9 million or four cents per diluted share a year earlier.
On an adjusted basis, Canada Goose says it earned five cents per diluted share in its latest quarter compared with an adjusted profit of 16 cents per diluted share a year earlier.
In its outlook, Canada Goose says it now expects total revenue for its full financial year to show a low-single-digit percentage decrease to low-single-digit percentage increase compared with earlier guidance for a low-single-digit increase.
It also says it now expects its adjusted net income per diluted share to show a mid-single-digit percentage increase compared with earlier guidance for a percentage increase in the mid-teens.
This report by The Canadian Press was first published Nov. 7, 2024.
