/Posthaste: 82-cent loonie seen on the horizon as Canadian dollar takes flight in new year

Posthaste: 82-cent loonie seen on the horizon as Canadian dollar takes flight in new year


Good Morning!

Cross-border shopping could become a better deal for Canadians if this forecaster is right about our dollar. Capital Economics predicts that the loonie could reach 79 U.S. cents by the end of this year and climb to 82 cents the year after.

The Canadian dollar had a strong ending to 2019, closing at 77 U.S. cents for the first time since October 2018. (It’s at 76.66 today) The 2.2% gain at the end of the year had a lot to do with weakness of the U.S. dollar, says Capital’s senior Canada economist Stephen Brown. Signs of stabilizing global growth and improvements in the energy sector, along with hopeful developments in U.S., China trade talks should support the currency in months to come.

There will be some short-term pain, however. Capital expects fourth-term growth in Canada to come in near zero. That could result in a more dovish statement from the Bank of Canada on Jan. 22 than markets expect, which could push the loonie back down to 75 cents, Brown says.

But Canada looks headed for a big rebound in growth in the first quarter. Brown says temporary problems such as the CN rail strike and a rupture of the Keystone pipeline are largely responsible for the recent decline in data. Now that those issues are resolved, December should see a sharp rebound in GDP.

That won’t be enough to save the fourth quarter, says Capital. But the 2.2% annualized growth in the first quarter that it predicts would leave the economy just slightly below what the Bank expects. Capital sees the Bank of Canada remaining on hold this year.

Here’s what you need to know this morning:

  • Bank of Canada Governor Stephen Poloz holds fireside chat at Greater Vancouver Board of Trade at 2:15 p.m. ET
  • The Lift & Co. Cannabis Business Conference and Expo in Vancouver, which includes industry experts speaking on panels as well as an industry trade show and exhibition
  • The Alberta government’s Fair Deal Panel holds a town hall meeting in Fort Saskatchewan
  • Notable earnings: Aritzia, Postmedia
  • Today’s data: Canadian housing starts and building permits, new housing price index

Palladium is proving to be the most precious of metals. While gold has been on a tear as investors sought safe havens amid rising hostilities in the Middle East, some of those gains evaporated yesterday along with fears of an escalation of hostilities. Silver and platinum also fell. But not palladium. The hottest commodity of 2019 is extending its rally into the new year, up 8% so far, more than gold or oil. That’s because palladium has more going for it than nervous investors. A shortage of supply of this metal that is a key component in pollution-control devices for vehicles combined with an increase in demand because of stricter emissions standards is driving the price, which topped US$2,100 an ounce yesterday. Citigroup Inc. predicts it could hit US$2,500 this year.

 

— Please send your news, comments and stories to [email protected]. — Pamela Heaven @pamheaven

With files from The Canadian Press, Thomson Reuters and Bloomberg

 

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