Briefing highlights
- The difference from 6 cents on the loonie
- Markets at a glance
- New York poised for stronger open
- Volvo to go all-electric in 2019
- Canaccord expands U.K. wealth business
The 6-cent solution
Now it's personal.
I've studied the Canadian dollar as part of my job for decades, but only started tracking it for personal reasons (and with no small measure of angst) when my daughter chose California for grad school.
That was at 73 cents (U.S.). We're now at about 77 cents. And I was pleasantly surprised, on Molly's behalf, to see the latest Royal Bank of Canada forecast for 79 cents later this year.
That 6-cent difference is huge.
(In fact, Molly, it's enough to pay for several flights home to visit your parents, even in winter, when the Lake Ontario beach may not quite stack up with California's.)
Universities recommend how much kids need for tuition, fees and living expenses.
Without going into details, and including the estimated cost of books, the difference between 73 cents and today is almost $5,600 (Canadian) a year on straight conversion where my daughter's concerned. That would rise to about $7,500 at RBC's 79 cents.
(That's before subtracting the scholarship amount, proud Dad hastens to add.)
Then there are the things that every California college kid needs. A mid-priced surfboard, for example, looks to be about $700 (Canadian), but you can get them used, too.
(I don't know the cost of a woman's bathing suit, and I'm not about to go creeping around online at work to find out.)
There's a lot at play where the loonie's concerned, including oil prices and U.S. demands in renegotiating the North American free-trade agreement.
But most significant, at this point, are the rate policies of the Bank of Canada and the Federal Reserve.
To Molly's good fortune, the Canadian dollar has been rising notably since the Bank of Canada began to signal in mid-June that its benchmark rate, now at 0.5 per cent, will rise sooner than markets had initially expected.
Indeed, many observers now believe Governor Stephen Poloz and his central bank colleagues will add one-quarter of a percentage point next week, followed by a similar increase in October.
"We then see a pause as the bank evaluates the impact of that tightening before restarting the process to gradually remove accommodation in 2018," said RBC economist Josh Nye.
"Less monetary policy divergence relative to the U.S. will support the Canadian dollar."
Canadian exporters may not share my glee. Nor may the Bank of Canada, which has counted on a low currency to help drive exports but was, of course, the driver of its recent ascent.
And, obviously, it knew the shift in policy would spark the bounce.
Even then, the currency is still "arguably at emergency levels of stimulus," said Derek Holt, Bank of Nova Scotia's head of capital markets economics, suggesting the loonie's recent fortunes should not stand in the way of a rate hike.
"Compared to mid-2014 after which commodities tanked, CAD remains 25 cents weaker against the USD," said Mr. Holt, referring to the Canadian and U.S. dollars by their symbols.
"The fact it isn't 32 cents weaker - as it was in early May - is a difference amounting to small potatoes and just reflects the BoC's argument (and our own) that we're past the worst of the commodity effects on the economy," he added.
"The level of [the U.S. dollar versus the loonie], however, still signals significant net stimulus to Canadian growth relative to where it was in mid-2014. The currency should be weaker given still-soft commodity prices, but if the worst effects of the commodity price plunge have worked through the economy, then CAD is still accommodative at the point when spare capacity is closed."
Not only that, Mr. Holt said, the central bank looks beyond just the U.S. dollar, and the loonie hasn't climbed by as much against certain other currencies.
Of course, California girl isn't heading to Mexico.
Read more
- Loonie hits 77¢: ‘The bigger surprise is why it took so bloody long’
- Barrie McKenna: Markets bank on July 12 rate hike
- The death of the U.S. dollar rally (as the loonie rises from the grave)
- It’s ‘uncool’ to be bullish on the loonie (but David Rosenberg sure is)
Markets at a glance
Read more
Volvo goes electric
Volvo is going all-electric in 2019.
Every car made from 2019 on will have an electric motor, representing "one of the most significant moves by any car maker to embrace electrification and highlights how over a century after the invention of the internal combustion engine electrification is paving the way for a new chapter in automotive history," the company said.
It plans to unveil five completely electric cars between 2019 and 2021.
"These five cars will be supplemented by a range of petrol and diesel plug-in hybrid and mild hybrid 48-volt options on all models," it said.
Read more