Briefing highlights
- Loonie down 5¢ in two months
- What to expect from the Fed
- Markets at a glance
- Watchdog probes grocery sector
- BMO’s new CEO takes helm
- Bitcoin tops $6,500
- Torstar revenue slumps 10 per cent
A nickel lost
The Canadian dollar has now lost a nickel over about two months as the Bank of Canada treads "lightly among the landmines."
And some observers see it easing further still.
The loonie peaked at above 82.5 cents (U.S.) in early September after the central bank became decidedly hawkish over the summer, raising interest rates twice.
Governor Stephen Poloz and his colleagues are now decidedly dovish, reinforcing that view on Tuesday and expected to do so again later today at a second Ottawa committee. And the currency stands at just about 77.5 cents.
"We are at a crucial spot in the economic cycle, and significant uncertainties are clouding the way forward," Mr. Poloz told the Commons finance committee late Tuesday.
This followed the latest rate decision, when the central bank held its benchmark steady at 1 per cent and signalled there would be no further move any time soon amid concerns over NAFTA and how consumers are dealing with the previous two hikes.
Mr. Poloz dropped "a laundry list of uncertainties about inflation, wages, the output gap, household debt and trade protectionism" again Tuesday, noted Bank of Montreal senior economist Sal Gautieri.
"Piling on, the governor said that, although the inflation risks were two-sided, 'we're much more preoccupied with downside risks," he added.
"That, in a nutshell, sums up the bank's bias to tread lightly among the landlines."
Analysts vary on how low the loonie can sink, with Canadian Imperial Bank of Commerce at the low end, forecasting 75 cents by early next year.
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What to watch for today
Don't expect much from the U.S. Federal Reserve this afternoon.
"That said, we see two-sided risks: more cautious language on the inflation outlook (dovish), and a signal about an incoming rate hike (hawkish)," said Toronto-Dominion Bank.
"Given current market pricing for a December hike, we expect any hawkish tone in the statement to have a more modest impact than a dovish bias."
The big Fed news, of course, is expected to come later with President Donald Trump's choice of a new chair for the central bank. And observers are betting heavily on current Fed governor Jerome Powell.
Markets at a glance
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BMO grades provinces
As Bank of Montreal sees it, everyone pales in comparison to British Columbia when it comes to provincial finances.
Indeed, Canada's westernmost province is alone in scoring an "A" in BMO senior economist Robert Kavcic's latest report card.
While B.C. came in with a $2.7-billion fiscal 2016-17 surplus, however, Mr. Kavcic did note that the province "quickly diverted" extra money in September to pay for election pledges and raised spending by $1.7-billion to outpace additional revenue of $1.6-billion.
"Still, we, along with the rating agencies, continue to hold B.C. on a pedestal as the strongest credit on the provincial landscape, but admit that it could get wobbly with additional major spending priorities in the hopper," Mr. Kavcic said.
In fact, he added, B.C., Ontario and Quebec are all "basking in a windfall, and appear to be letting the stimulus flow rather than shoring up capacity for the next downturn."
Well, yes, the latter two are heading into elections, so "don't be surprised to see much of these windfalls get directed toward firmer program spending and/or tax relief," Mr. Kavcic said.
"In Ontario's case, program spending for [fiscal 2017-18] is already tracking a whopping $9.5-billion higher than where it was projected for this year, two years ago, eating up all of the revenues upside from the stronger economy and cap-and-trade program," he added.
"In Quebec, the premier has hinted at tax relief for workers and businesses soon, in either the fall update or 2018 budget. At this point, it looks like Canadian governments are leaning toward making it rain."
Here's how Mr. Kavcic grades the provinces:
The economies of the energy provinces, of course, are rebounding from the oil shock. But, Mr. Kavcic pointed out, both Alberta and Saskatchewan still face budget deficits that are either in line with, or a bit worse than, what had been forecast earlier.
Alberta, he added, dipped into $250-million, or half of, of its risk buffer.
"That comes amid a tough (and abnormal) combination of lower [West Texas intermediate] oil prices ($49 assumed now versus $55 in the budget) and a stronger loonie,"Mr. Kavcic said.
"While economic growth in the province could lead the country this year, we've held back our optimism given a still-high jobless rate, plenty of slack in some sectors and the expectation that growth will settle down with range-bound oil prices."
Newfoundland and Labrador is also still struggling but "has largely dealt with a serious fiscal challenge, leaning on a stiff and broad-based dose of tax measures (in budget 2016) rising to nearly $1-billion per year."
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