The Canadian dollar has emerged relatively unscathed from the collapse in crude oil prices over the past few months, and has even managed to enjoy a mini-rally amid the lockdown carnage.
But that’s about to come to an end.
The Canadian dollar gave up some of its gains against the greenback last week, falling 0.5 per cent to 1.40, or 71.30 U.S. cents, on Friday. This morning the loonie was trading 0.11 per cent higher to 71.48 U.S. cents, but there is near- universal consensus that there is weakness ahead for the Canadian dollar.
“We are looking for one more phase of Canadian dollar weakness as we go through Q2 and into Q3, looking for the U.S. dollar to move towards 1.43 (69.9 U.S. cents) against the Canadian dollar,” said George Davis, RBC Capital Markets’ chief technical strategist in foreign exchange trading, in a podcast posted by the bank.
RBC expects Canada’s GDP to contract a jaw-dropping 40 per cent in the second quarter, which would trigger a loonie decline in the medium-term, although a rebound in the third and fourth quarter would likely be supportive.
“It’s probably not going to be a quick, sharp V-shaped type of recovery that people were expecting initially, and so there’s likely going to be a few setbacks along the way, and that will lead to some new Canadian dollar weakness,” Davis said.
By next year, the C-dollar could claw its way back to 1.35 (74 U.S. cents) but there are a number of headwinds ahead, including the U.S. presidential elections.
“With both Trump and Joe Biden seen pro-economy, they will likely both be positive for the U.S. dollar, with Trump having a slight edge,” Davis said. “It will be the bearish for the Canadian dollar.”
Veteran analyst David Rosenberg, who has been bearish on the loonie for some time, says the Canada Mortgage and Housing Corporation’s prediction that home prices could contract 18 per cent could set to unleash dollar weakness.
“I can also tell you if Canadian Mortgage and Housing Corporation is prescient in its forecast for an 18% plunge in Canadian home prices then there is no chance the Canadian dollar will be anywhere near C$1.40 which it just touched in renewed bearish fashion. Sell, Mortimer!,” he said in a tweet.
The Rosenberg Research founder said investors may be underestimating the impact of a property market plunge on the domestic household sector that’s overextended on residential real estate.
Real estate is valued at $2.5 trillion, “which is over 100% of GDP, and it would approximate a $500 billion hit to the ‘wealth effect’ on spending, not to mention increasing financial strains given the record $1.5 trillion mortgage debt outstanding,” Rosenberg said in a note to clients.
While the loonie has rallied in tandem with resurgent oil prices, the commodity rally is vulnerable, especially as U.S.-China tensions hover over the horizon.
“Markets could be pricing in slightly too much optimism as of right now,” said Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce.
“As the reality of depressed equity earnings, and the limitations on the recovery by the potential for a second wave set in, that would see a stall in oil’s rebound, allowing USD/CAD to reach 1.41 by June and ending Q3 at 1.43 (69.9 U.S. cents),” Shenfeld said in a note.
Canada’s weak trade record in the last cycle also points to the need for a more competitive exchange rate in the longer-term, as the economy weans itself off of debt-financed consumption and housing as sources of growth, Shenfeld said.
“Look for USD/CAD to still be hovering around 1.41 by the end of next year, held back by the country’s trade imbalance.”
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MILLENNIAL MONEY: Spent is a new column in which the Financial Post’s Victor Ferreira takes an entertaining and insightful look at the financial lives of everyday Canadian millennials. Some toil in lower-paying jobs while others are earning six-figures — what unites them is their desire for more and their everlasting struggle to get it.
In this week’s column, a millennial is dreams of moving out of his dad’s house and leaving the city by banking his CERB cheques. Full column here. Illustration/Brice Hall
In his last week on the job, Bank of Canada governor Stephen Poloz gives the University of Alberta Eric J. Hanson Memorial Lecture by videoconference
U.S. markets are closed for Memorial Day
Joyce Murray, Minister of Digital Government, appears before the House of Commons standing committee on government operations and estimates to discuss the federal response to the COVID-19 pandemic
Cullen Commission, inquiry into money laundering, hearings into an overview of the problem, attempts to quantify the extent and regulatory models
Scotiabank and National Bank will kick off earnings seasons for the big Canadian banks on Tuesday
Retail sales plunged 10 per cent in March when widespread physical distancing measures first took effect. Statistics Canada said preliminary data indicates the decline will be even steeper in April, with early figures suggesting a decline of 15 per cent.
However, the so-called ‘sins’ categories were up rather smartly. Booze sales advance by 17.5 per cent month-on-month and cannabis stores registered a 19.2 per cent m/m gain (the latter is not seasonally adjusted due to a lack of history).
“Apparently the munchies may have helped food sales!,” writes Scotiabank.
Recent stock market volatility has put a spotlight on daily market movements for people who would not normally pay such close attention to their portfolio. Setting appropriate expectations about investment returns is important for investors and advisors. These expectations depend on several factors and impact investment and financial planning decisions, writes Jason Heath.
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.
