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Canada's economy is seen lagging US for fourth straight year – BNN

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Economists revised their growth estimates for Canada higher this year, though the recovery is expected to lag the U.S.

Canada’s economy is expected to expand 4.7 per cent in 2021, according to Bloomberg’s latest monthly survey of analysts. That’s up from a previous yearly estimate of 4.4 per cent. Growth in 2022 is seen at 4.1 per cent, little changed from the January survey.

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The upward revision reflects what has been a more upbeat outlook in recent weeks. The global vaccine rollout, rising commodity prices that help Canada and potential impacts from more fiscal stimulus in the U.S. are driving the more optimistic predictions.

But economists upgraded U.S. growth by even more than in Canada, seeing it at 4.9 per cent in 2021 versus a 4.1 per cent estimate only a month ago. If the projections prove right, the U.S. will have outperformed Canada for a fourth straight year.

Canada’s economy is estimated to have contracted by 5.4 per cent in 2020, versus a decline of 3.5 per cent in the U.S.

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Canadian dollar forecasts boosted as vaccine rollout accelerates: Reuters poll

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – Canadian dollar forecasts for the coming months have been raised by strategists, reflecting recent gains for the currency but also expectations commodity prices will benefit from the reopening of the global economy, a Reuters poll showed.

Canada is a major producer of commodities, including oil, which has soared about 80% since November, helped by supply cuts from major producers and the prospect of stronger global economic growth this year as COVID-19 vaccines roll out.

The United States expects to have enough vaccine for every American adult by the end of May. Canada‘s vaccination campaign is also ramping up after earlier supply disruptions. Its target for full rollout is September.

“I think the economy is going to open up quickly and oil prices are going to stay firm,” said Ronald Simpson, managing director, global currency analysis at Action Economics. “Rising activity in Canada is going to probably help the Canadian dollar as well.”

Canada‘s economy grew at an annualized rate of 9.6% in the fourth quarter. It probably expanded again in January despite lockdowns in some provinces to contain the pandemic.

Evidence of economic resilience has raised speculation the Bank of Canada will reduce its bond purchases as soon as April. The central bank is due to make an interest rate decision on March 10.

The median forecast of nearly 40 analysts in the March 1-3 poll was for the Canadian dollar to edge 0.4% higher to 1.26 per U.S. dollar, or 79.37 U.S. cents, in three months, compared with a 1.27 forecast in February’s poll. It was then expected to advance to 1.25 in one year.

The loonie has rallied about 16% since last March, helped by declines for the safe-haven U.S. dollar. Last Thursday, it touched a three-year high at 1.2464 but has since been buffeted by global market volatility as bond yields surged.

For some analysts, the loonie’s move higher was too far, too fast. That could leave it vulnerable to a pullback in the near term even if the longer-term outlook remains bright.

“While we maintain our cautiously bullish view on the Canadian dollar over the coming twelve months, headwinds to this view over the next quarter are plentiful,” analysts at Monex Europe and Monex Canada, including Simon Harvey, said in a note.

Potential headwinds include an earlier timeline for OPEC to raise output, the analysts said.

(For other stories from the March Reuters foreign exchange poll:)

 

(Reporting by Fergal Smith; polling by Swathi Nair and Nagamani Lingappa; editing by Larry King)

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South Korea economy shrank in 2020 for 1st time in 22 years – Yahoo Canada Finance

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SEOUL, Korea, Republic Of — South Korea’s central bank says the country’s economy shrank for the first time in 22 years in 2020 as the coronavirus pandemic destroyed service industry jobs and depressed consumer spending.

Preliminary data released by the Bank of Korea on Thursday showed the country’s gross domestic product last year contracted 1% from 2019. It was the first annual contraction since 1998, when South Korea was in the midst of a crippling financial crisis.

The economy would have been even worse if not for the country’s technology exports, which saw increased demand driven by personal computers and servers as the pandemic forced millions around the world to work at home.

The bank expects South Korea’s economy to manage a modest recovery this year driven by exports. But it says it would take a longer time for the job market to recover from the damage to services industries such as restaurants and transportation.

The bank since March last year has maintained its policy rate at an all-time low of 0.5% to help pump money into the economy. But experts say traditional financial tools aimed at lowering borrowing costs have had only limited effect during the pandemic that has damaged both supply and demand.

The country reported another new 424 cases of the coronavirus on Thursday, bringing its national caseload to 91,240, including 1,619 deaths.

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Canadian dollar clings to this week’s gains as oil climbs

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Wednesday, holding on to this week’s gains as oil prices rose and domestic data showed the value of building permits scaling a record high in January.

The loonie was trading nearly unchanged at 1.2629 to the greenback, or 79.18 U.S. cents. Since the start of the week, it has advanced 0.9%.

Canada‘s “strong” GDP data and the rally in oil prices have helped underpin the Canadian dollar, said George Davis, chief technical strategist at RBC Capital Markets.

The price of oil, one of Canada‘s major exports, settled 2.6% higher at $61.28 a barrel, boosted by a huge drop in U.S. fuel inventories and expectations that OPEC+ producers might decide against increasing output when they meet this week.

Canadian building permits rose 8.2% in January from December to C$9.9 billion, surpassing the previous record set in April 2019, Statistics Canada said.

On Tuesday, data showed that Canada‘s economy grew at an annualized rate of 9.6% in the fourth quarter and likely rose again in January, boosting speculation the Bank of Canada will reduce its bond purchases soon.

The central bank is due to make an interest rate decision next Wednesday.

A break of 1.2587 would add “to positive CAD momentum,” while the currency could find buyers at 1.2655, Davis said.

The U.S. dollar rose against a basket of major currencies as investors priced for strong U.S. growth relative to other regions.

Canadian government bond yields were higher across a steeper curve in tandem with U.S. Treasury yields. The 10-year rose 7.6 basis points to 1.401% but was trading well below Friday’s 13-month high at 1.501%.

 

(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)

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