Briefing highlights
- Forecasts sees Canadian dollar at 75 cents
- Markets at a glance
- Encana profit slips in third quarter
- Loblaw to merge loyalty programs
- Tencent buys stake in Snap
- Canadian building permits on rise
Three-quarters of a dollar
At least three forecasts see the Canadian dollar tumbling to the 75-cent (U.S.) mark.
Not everyone sees it that way, and certain timelines may be different, but the Bank of Canada's recent signal that it's taking a time-out in its rate-hiking cycle has currency analysts rewriting the outlook for the loonie.
"Our forecast now assumes the BoC will remain on the sidelines for the next couple of meetings before resuming a tightening cycle in the second quarter of 2018," said Royal Bank of Canada economist Josh Nye.
"A slightly slower pace of hikes prompted us to lower our Canadian dollar forecast, with the currency now expected to dip to 75 U.S. cents early next year before recovering as the BoC resumes raising rates."
Mr. Nye isn't alone.
Canadian Imperial Bank of Commerce has a similar time frame for a 75-cent currency. Capital Economics also projects that level, though by the close of 2018.
Others have also changed their projections, though aren't quite as pessimistic (or optimistic if you happen to be looking at it through the eyes of a Canadian exporter).
"We have adjusted our own forecasts for the BoC and now look for rates to remain on hold until 2018, when we see only two 25-basis-point increases now," said Shaun Osborne, Bank of Nova Scotia's chief currency strategist.
"We have adjusted our expectations for the CAD significantly as well, lifting the 2017 year-end forecast to 1.28 and our end-2018 forecast to 1.25."
Referring to the Canadian dollar by its symbol, he means a loonie at about 78 cents and 80 cents, respectively.
In turn, Mark McCormick, North American head of foreign exchange strategy at TD securities, sees the bottom for the currency at just shy of 77.5 cents.
While the central bank's timing has been the primary force behind the loonie's fortunes, other factors may also play into it, including North American free-trade negotiations.
"Already two-thirds of [small and medium-size businesses] in Canada are telling us that the uncertainty regarding NAFTA is impacting their investment decisions, and the ratio among larger firms is most likely higher," CIBC deputy chief economist Benjamin Tal said in a recent outlook.
"The apathy in the [foreign exchange] market to that unfolding reality is mind boggling. As a result, we see the loonie depreciating even more than previously forecast, with USD/CAD hitting 1.33 in 18Q1."
By that, Mr. Tal means a Canadian dollar just above 75 cents.
Then there are oil prices, though the currency's traditional correlation with crude has broken down of late.
"Oil prices have enjoyed a nice little run recently, but it's hard to see that looking at movements in the C$," said Andrew Grantham, Mr. Tal's colleague at CIBC.
"Indeed, the currency's correlation with oil prices is currently the lowest in almost three years, as its direction has been driven almost exclusively by expectations surrounding BoC rate hikes."
That doesn't mean there's no correlation, though, and crude has been on the rise, which TD's Mr. McCormick said should help support the loonie.
While markets have now largely ruled out a rate hike next month, "there's still room for the market to price out a January move, as well," Mr. Grantham said.
"That, combined with growing uncertainty over the future of NAFTA, will see the C$ depreciate further in the coming three to six months."
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Markets at a glance
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Encana profit slips
Encana Corp. is lauding its third-quarter results amid a dip in profit but a projection that would see its "core assets" meet or top their targets.
Calgary's Encana posted a third-quarter profit of $294-million, or 30 cents a share, down from $317-million or 37 cents a year earlier.
"We are generating significant momentum for 2018 and are strongly positioned to deliver leading returns, cash flow growth and free cash flow through our five-year plan," chief executive officer Doug Suttles said in a statement, adding that "each of our core assets is firmly on track to meet or beat its 2017 targets."
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More news
- Loblaw to merge Shoppers Optimum and PC Plus loyalty programs
- China’s Tencent buys 12% stake in Snapchat owner
- Canadian building permits rise for first time in three months