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Economy

Dollar shines as virus, economy woes hit risk assets – TheChronicleHerald.ca

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By Stanley White

TOKYO (Reuters) – The dollar extended gains against most currencies on Thursday as signs of economic slowdown in Europe and the United States renewed concern about a second wave of coronavirus infections.

The euro, which has already taken a hit due to worries about a return to severe lockdown restrictions, faces an additional hurdle later on Thursday with the release of data on German business sentiment.

The dollar is likely to continue to rise as another spike in coronavirus cases and the Federal Reserve’s warnings that the U.S. economy needs more fiscal stimulus cause investors to repatriate funds from riskier assets.

“Risk is being sold across the board, and there is a big unwinding of dollar shorts,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.

“Questions surrounding the coronavirus and the need for even more stimulus are turning flows back to the dollar.”

The dollar traded at $1.1658 per euro on Thursday in Asia, just shy of a two-month low high reached on Wednesday.

The pound bought $1.2714, near its weakest level since late July.

The dollar was quoted at 0.9240 Swiss franc , which is near a nine-week high.

The U.S. currency bought 105.40 yen , holding onto a 0.4% gain from the previous session.

The dollar has rallied this week as rising coronavirus infections in Europe and Britain undermined investor optimism about vaccine progress.

The Ifo survey due later on Thursday is forecast to show an improvement in business morale in Germany, Europe’s largest economy.

However, sentiment for the euro has already suffered a big blow after surveys released on Wednesday showed new restrictions to quell a resurgence in coronavirus infections slammed the euro zone’s services industry into reverse.

The mood for riskier assets has also soured after data on Wednesday showed U.S. business activity slowed in September and several Fed policymakers warned that further government aid is needed to bolster the economy.

The dollar index =USD>, which pits the dollar against a basket of six major currencies, stood at 94.336 on Thursday, close to a nine-week high.

There are no major economic data releases scheduled during the Asian session, so trading could be subdued, analysts said.

Some investors are watching the Australian and New Zealand dollars, which have come under pressure due to growing expectations for additional monetary easing.

A recent decline in commodity prices is expected to increase downside risks for the Antipodean currencies, some traders say.

The Aussie traded at $0.7069, near its weakest since July 21.

Across the Tasman Sea, the kiwi bought $0.6549 after tumbling by 1.3% in the previous session.

(Reporting by Stanley White; Editing by Sam Holmes)

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Economy

Canada's economy moves into 'recuperation phase' as second-wave impact looms – The Globe and Mail

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Canada’s economic recovery continued to moderate as summer wound down, leaving activity still well short of pre-pandemic levels before the second wave of the COVID-19 virus hit, new data from Statistics Canada show.

The agency reported Friday that real gross domestic product (GDP) rose 1.2 per cent in August from July, slightly more than its preliminary estimate of 1 per cent. It was the fourth straight month of growth, as the economy continued its rapid rebound from the lockdowns in the spring aimed at containing the virus, although the pace of the recovery has been slowing after the dramatic effects of the re-openings in May and June.

Statscan also published an advance estimate for September of 0.7-per-cent growth – which, if accurate, would mean the economy expanded by about 10 per cent in the third quarter, consistent with Bank of Canada and private-sector estimates. But that still leaves the economy about 4 per cent below its pre-COVID levels.

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With October’s sharp increase in the spread of the virus, both in Canada and abroad, renewed virus-containment restrictions threaten to put the brakes on the recovery.

“The economy is now moving into the recuperation phase, where additional gains in economic activity are harder to come by. With pandemic-related uncertainty weighing on business and consumer confidence, most industries are struggling to return to pre-pandemic levels of output,” Toronto-Dominion Bank senior economist Sri Thanabalasingam said in a research note.

The August GDP gains were led by a continued strong recovery in the service sectors of the economy (up 1.5 per cent), which were more deeply affected by the spring lockdowns and subsequent re-openings, while goods-producing sectors grew a more modest 0.5 per cent. Economists noted that the segments that drove much of August’s gains – services such as arts, entertainment and recreation (up 13.7 per cent) and accommodation and restaurants (up 7.3 per cent) – stand to be the hardest hit in the second-wave containment measures, as authorities focus on reducing contact through indoor gatherings.

“The way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter,” Bank of Montreal chief economist Doug Porter said in a research report.

Earlier this week, the Bank of Canada issued new forecasts predicting fourth-quarter growth of only 0.2 per cent quarter over quarter – or 1 per cent annualized – in light of the second wave of the pandemic and the return of some government-mandated closures and business restrictions. Ontario and Quebec have already shut down indoor restaurants and bars in large urban centres where COVID-19 cases are highest, while other provinces are clamping down on indoor gatherings and debating whether additional measures are warranted.

Some economists think the central bank’s forecast is overly pessimistic.

“We suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” said Mr. Porter, who forecast that quarterly growth would top 2 per cent annualized.

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“We think there is still scope for continued rebounds in those sectors not directly affected by the restrictions, so we are pencilling in a much larger fourth-quarter gain of 5 per cent annualized,” said Stephen Brown, senior Canada economist at Capital Economics, in a research note.

But the COVID-19 virus remains a massive wild card in any economic forecast, as a growing number of countries face the prospect of renewed restrictions – while at the same time eagerly looking forward to the growing possibility of a viable vaccine in early 2021.

“We are now in a phase of the recovery that could see strong winds and dangerous tides. Navigating through the turbulence will not be easy, as much will depend on the course of the virus,” TD’s Mr. Thanabalasingam said. “Getting the spread under control could right the ship, but seas will remain choppy without a vaccine or effective treatment.”

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Economy

Canada's economy moves into 'recuperation phase' as second-wave impact looms – The Globe and Mail

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Canada’s economic recovery continued to moderate as summer wound down, leaving activity still well short of pre-pandemic levels before the second wave of the COVID-19 virus hit, new data from Statistics Canada show.

The agency reported Friday that real gross domestic product (GDP) rose 1.2 per cent in August from July, slightly more than its preliminary estimate of 1 per cent. It was the fourth straight month of growth, as the economy continued its rapid rebound from the lockdowns in the spring aimed at containing the virus, although the pace of the recovery has been slowing after the dramatic effects of the re-openings in May and June.

Statscan also published an advance estimate for September of 0.7-per-cent growth – which, if accurate, would mean the economy expanded by about 10 per cent in the third quarter, consistent with Bank of Canada and private-sector estimates. But that still leaves the economy about 4 per cent below its pre-COVID levels.

Story continues below advertisement

With October’s sharp increase in the spread of the virus, both in Canada and abroad, renewed virus-containment restrictions threaten to put the brakes on the recovery.

“The economy is now moving into the recuperation phase, where additional gains in economic activity are harder to come by. With pandemic-related uncertainty weighing on business and consumer confidence, most industries are struggling to return to pre-pandemic levels of output,” Toronto-Dominion Bank senior economist Sri Thanabalasingam said in a research note.

The August GDP gains were led by a continued strong recovery in the service sectors of the economy (up 1.5 per cent), which were more deeply affected by the spring lockdowns and subsequent re-openings, while goods-producing sectors grew a more modest 0.5 per cent. Economists noted that the segments that drove much of August’s gains – services such as arts, entertainment and recreation (up 13.7 per cent) and accommodation and restaurants (up 7.3 per cent) – stand to be the hardest hit in the second-wave containment measures, as authorities focus on reducing contact through indoor gatherings.

“The way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter,” Bank of Montreal chief economist Doug Porter said in a research report.

Earlier this week, the Bank of Canada issued new forecasts predicting fourth-quarter growth of only 0.2 per cent quarter over quarter – or 1 per cent annualized – in light of the second wave of the pandemic and the return of some government-mandated closures and business restrictions. Ontario and Quebec have already shut down indoor restaurants and bars in large urban centres where COVID-19 cases are highest, while other provinces are clamping down on indoor gatherings and debating whether additional measures are warranted.

Some economists think the central bank’s forecast is overly pessimistic.

“We suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” said Mr. Porter, who forecast that quarterly growth would top 2 per cent annualized.

Story continues below advertisement

“We think there is still scope for continued rebounds in those sectors not directly affected by the restrictions, so we are pencilling in a much larger fourth-quarter gain of 5 per cent annualized,” said Stephen Brown, senior Canada economist at Capital Economics, in a research note.

But the COVID-19 virus remains a massive wild card in any economic forecast, as a growing number of countries face the prospect of renewed restrictions – while at the same time eagerly looking forward to the growing possibility of a viable vaccine in early 2021.

“We are now in a phase of the recovery that could see strong winds and dangerous tides. Navigating through the turbulence will not be easy, as much will depend on the course of the virus,” TD’s Mr. Thanabalasingam said. “Getting the spread under control could right the ship, but seas will remain choppy without a vaccine or effective treatment.”

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Canadian economic growth cools to 1.2% in August – CBC.ca

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The Canadian economy grew in August as real gross domestic product rose by 1.2 per cent in August, Statistics Canada reported Friday. 

That marked the fourth straight month of growth following the steepest drops on record back in March and April amid pandemic lockdowns. August’s figure was down from the 3.1 per cent expansion seen in July.

The August number was still ahead of what forecasters had been expecting. According to financial data firm Refinitiv, economists had been predicting growth of 0.9 per cent for the month.

Despite the recent string of growth, overall economic activity is still about five per cent below February’s pre-pandemic level, Statistics Canada said.

September growth is forecast

Preliminary information from Statistics Canada indicates real GDP was up 0.7 per cent in September, with increases seen in the manufacturing and public sectors, as well as in mining, quarrying and oil and gas extraction.

“This advanced estimate points to an approximate 10 per cent increase in real GDP in the third quarter of 2020,” Statistics Canada said. Back in the second quarter, the country’s GDP shrank by 11.5 per cent in the three-month period between April and June. 

Assuming the economy contracts in October and November as a result of a resurgence of coronavirus cases, fourth-quarter GDP looks likely to undershoot the Bank of Canada’s “tepid” forecast for a seasonally adjusted annual rate of one per cent, said CIBC Capital Markets senior economist Royce Mendes.

“It appears that the economy was slowing more than expected heading into the fourth quarter, and the most likely outcome now suggests that GDP barely advanced during the period,” Mendes said in a commentary.

BMO chief economist Doug Porter said the way forward has been deeply clouded by the second wave and renewed restrictions, so growth will cool considerably in the fourth quarter.

“However, we suspect that with ongoing massive fiscal support, less restrictions than earlier, and, simply, that consumers and businesses have learned to operate in this new environment, the late-year setback should be relatively mild,” Porter said. “In fact, we continue to expect modest growth overall for [the fourth quarter].”

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