Economy
Canadian dollar forecasts grow more bullish as economy strengthens: Reuters poll – The Journal Pioneer
By Fergal Smith
TORONTO (Reuters) – Analysts have raised their Canadian dollar forecasts for the coming year, expecting the currency to benefit from faster growth in the domestic economy and a potential reduction by the Bank of Canada of its bond purchases, a Reuters poll showed.
The loonie advanced 1.4% against the U.S. dollar in the first quarter, its fourth straight quarterly gain and the best performance among the G10 currencies.
The median forecast of more than 30 strategists was for the Canadian dollar to rise a further 0.6% over the next three months to 1.25 per U.S. dollar, or 80 U.S. cents.
It was then expected to climb to 1.23 in one year, compared with a 1.25 forecast in March’s poll.
“We expect the Canadian dollar to be a general outperformer among the G10 over the coming year,” said Erik Nelson, a currency strategist at Wells Fargo in New York.
“Canada’s economy looks poised to enjoy one of the strongest growth rebounds this year thanks to a combination of domestic fiscal support, higher commodity prices and spillover from U.S. demand.”
Canada sends about 75% of its exports to the United States, including oil, which has soared about 80% since last November.
Data on Wednesday showed Canada’s economy expanded for a ninth consecutive month in January and most likely grew in February, adding to evidence a recovery from the coronavirus pandemic was stronger than expected.
That could encourage Canada’s central bank to dial back the pace of stimulus.
“The Bank of Canada is likely to be among the first to taper asset purchases, furthering yield support for the loonie,” Nelson said.
Strategists expect the bank to cut this month the amount of bonds it buys each week to C$3 billion from C$4 billion. Canada’s 5-year yield trades about 7 basis points above the equivalent U.S. rate.
The country is facing a potential third wave of COVID-19 infections. Still, vaccine supplies are picking up, which could help narrow the economic advantage of the United States, one of the countries with the fastest rollouts.
“The U.S. economy will likely do well in the short term, but several other countries will be following in its wake soon as vaccination will progress,” said Hendrix Vachon, a senior economist at Desjardins.
(For other stories from the April Reuters foreign exchange poll:)
(Reporting by Fergal Smith; Polling by Manjul Paul and Mumal Rathore; Editing by Mark Heinrich)
Economy
Federal budget is about ensuring fair economy for ‘everyone’: Trudeau – Global News
Delivering remarks to his Liberal cabinet during a caucus meeting on Wednesday, Prime Minister Justin Trudeau emphasized that the newly-announced federal government is intended to help create a fair economy for “everyone” in Canada, particularly those from Millennials and Gen Z.
Economy
Russia to grow faster than all advanced economies says IMF – BBC.com
An influential global body has forecast Russia’s economy will grow faster than all of the world’s advanced economies, including the US, this year.
The International Monetary Fund (IMF) expects Russia to grow 3.2% this year, significantly more than the UK, France and Germany.
Oil exports have “held steady” and government spending has “remained high” contributing to growth, the IMF said.
Overall, it said the world economy had been “remarkably resilient”
“Despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops,” the IMF said.
The IMF is an international organisation with 190 member countries. They are used by businesses to help plan where to invest, and by central banks, such as the Bank of England to guide its decisions on interest rates.
The group says that the forecasts it makes for growth the following year in most advanced economies, more often than not, have been within about 1.5 percentage points of what actually happens.
Despite the Kremlin being sanctioned over its invasion of Ukraine, the IMF upgraded its January predictions for the Russian economy this year, and said while growth would be lower in 2025, it would be still be higher than previously expected at 1.8%.
Investments from corporate and state owned enterprises and “robustness in private consumption” within Russia had promoted growth alongside strong exports of oil, according to Petya Koeva Brooks, deputy director at the IMF.
Russia is one of the world’s biggest oil exporters and in February, the BBC revealed millions of barrels of fuel made from Russian oil were still being imported to the UK despite sanctions.
Away from Russia, the IMF downgraded its forecasts across Europe and for the UK this year, predicting 0.5% growth this year, making the UK the second weakest performer across the G7 group of advanced economies, behind Germany.
The G7 also includes France, Italy, Japan, Canada and the US.
Growth is set to improve to 1.5% in 2025, putting the UK among the top three best performers in the G7, according to the IMF.
However, the IMF said that interest rates in the UK will remain higher than other advanced nations, close to 4% until 2029.
The group expects the UK to have the highest inflation of any G7 economy in 2023 and 2024.
Chancellor Jeremy Hunt said the IMF’s figures showed that the UK economy was turning a corner.
“Inflation in 2024 is predicted to be 1.2% lower than before, and over the next six years we are projected to grow faster than large European economies such as Germany or France – both of which have had significantly larger downgrades to short-term growth than the UK,” he said.
Conflict in the Middle East
Economists at the IMF warned that if the Israel-Hamas conflict escalates further in the Middle East it could lead to rising food and energy prices around the world.
Continued attacks on ships in the Red Sea and the ongoing war in Ukraine could also affect the so far “remarkably resilient” global economy, it said.
A potential spike in food, energy and transport costs would see lower-income countries hardest hit, it added.
Economy
Why is Germany maintaining economic ties with China? – Al Jazeera English
German Chancellor Olaf Scholz has been on a three-day visit to China in a bid to shore economic ties.
Germany is China’s biggest European trade partner.
But, Berlin also sees Beijing as a competitor and a rival.
And – in its first-ever “strategy on China” launched last year – pledged to reduce German dependence on the Chinese market.
But, during his visit last week to China, the German Chancellor signalled his intentions to maintain business ties.
That may have angered some of Olaf Scholz’s closest allies.
The European Union has launched several investigations into exports of Chinese green technology to protect European industry from competition.
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