The Canadian dollar is expected to strengthen over the coming year as global economic recovery continues from the COVID-19 crisis but gains for the currency could be kept in check by Federal Reserve interest rate hikes, a Reuters poll showed.
The median forecast in a Reuters poll was for the Canadian dollar to strengthen 1% to 1.26 per U.S. dollar, or 79.37 U.S. cents in three months, compared to 1.25 in last month’s forecast.
It was then expected to climb to 1.2350 in a year’s time.
“Our expectation of Canadian dollar strength over the 12-month horizon is based upon our expectation of improved global growth conditions,” said Simon Harvey, Head of FX analysis for Monex Europe and Monex Canada.
Growth will pick up after the first quarter of the year “as variant risk subsides,” Harvey added.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the outlook for the global economy. Oil has rallied 27% since December.
Canadian provinces have announced in recent days restrictions to curb the spread of the Omicron coronavirus variant, mirroring moves in some other countries.
Still, investors remain generally calm about the global economic impact of the variant after studies suggested the risk of hospitalization is lower.
Also supportive of the loonie, the Bank of Canada https://www.reuters.com/markets/us/despite-omicron-bank-canada-likely-signal-earlier-rate-hikes-possible-2021-12-17 is likely to change its interest rate guidance this month so that it has the option to raise borrowing costs earlier than planned.
Money markets expect Canada’s central bank to hike five times in 2022 and that the policy rate will peak over the coming years at 2%, the so-called terminal rate.
That exceeds the 1.6% endpoint seen for the U.S. Federal Reserve but those expectations could shift.
“We still think the terminal rate in the U.S. is going to be higher,” said Bipan Rai, North America head, FX strategy at CIBC Capital Markets.
“Once we get more hikes priced in further out (the money market curve) for the Fed, that should translate into U.S. dollar strength.”
The Canadian dollar was the only G10 currency to gain ground against the greenback in 2021, rising 0.8%.
(For other stories from the January Reuters foreign exchange poll:)
(Reporting by Fergal Smith; Polling by Sarupya Ganguly, Anant Chandak and Indradip Ghosh, Editing by William Maclean)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
