The Canadian dollar jumped one-third of a cent to a new three-year
high above US$1.02 Friday morning even as oil prices have begun to
stabilize on news Saudi Arabia intends to make up any supply disruptions
out of Libya. The loonie touched US$1.0203 at about 8 a.m. ET, its highest level since March 2008. A
major driver for this new strength is weakness in the U.S. dollar,
Camilla Sutton, currency strategist with Scotia Capital, said in a
report Friday. "The U.S. dollar has managed to weaken in
the face of rising risk aversion as rising oil prices are playing into
several market fears," she said. “The first is how it will
impact global inflation and how central banks will react to it ... In
addition, rising oil prices will weigh on the fragile U.S. recovery,
which in turn could support an extended dovish stance from the Fed,” Ms.
Sutton said. Currency markets are keeping a keen eye on the Bank of Canada rate announcement on Tuesday. “The
Bank of Canada’s interest rate decision and statement will provide
significant insight in to whether or not the market is correctly pricing
the risks of a BoC hike this spring,” Ms. Sutton said. All 39
forecasters surveyed by Reuters predicted the Bank of Canada would keep
its key interest rate on hold at 1.0% on Tuesday. But 24 of poll
participants, more than 60%, expect interest rates to rise by the end of
the first half. The median forecast points to a quarter-point increase
on May 31 to 1.25%. But the strength of the currency will be a key factor in the bank’s decision. In
its January rate statement, the bank said the persistent strength of
the currency, combined with Canada’s low productivity, was holding back
the export recovery and contributing to a widening of the current
account deficit. In subsequent speeches, bank officials have
suggested they are resigned to the strong currency as a permanent
feature, urging companies to not base their business models on a weaker
Canadian dollar.
" USD- GDP come out weaker than expected .."..
" the economy underperformed in the fourth quarter " .....
The U.S. economy grew at a 2.8
percent annual rate in the fourth quarter, slower than previously
calculated and less than forecast as state and local governments
made deeper cuts in spending.
The revised increase in gross domestic product compares with
a 3.2 percent estimate issued last month and a 2.6 percent gain
in the third quarter, figures from the Commerce Department showed
today in Washington. The economy, excluding inventories, grew at
a 6.7 percent pace, the most since 1998.
Americans may be in a better position to keep spending after
tax cuts put more money in their pockets, while companies such as Caterpillar Inc. benefit from faster economies overseas and
business investment. A surge in oil prices sparked by turmoil in Africa and more cutbacks by state and local governments represent
risks to growth.
“The economy underperformed expectations in the fourth
quarter,” said Ryan Sweet, a senior economist at Moody’s
Analytics Inc. in West Chester, Pennsylvania. Still, “if you
factor in the rising gas prices, the economy is performing well.
Consumers are taking the rise in gasoline prices in stride” so
far, he said.
For all of 2010, the world’s largest economy expanded 2.8
percent, the most in five years, after shrinking 2.6 percent in
2009. The volume of all goods and services produced rose to
$13.37 trillion in the final three months of 2010.
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