Friday FX Brief: Canadian Dollar in Purgatory

Andrew Wilkinson submits: Earlier in the week investor fears about the prospects for a double-dip recession appear to be vanishing into thin air as the week draws to a close. The euro’s rejuvenation continues after the ECB President left the world with an upbeat message at Thursday’s press conference. Meanwhile it appears that the shellacking fared by the commodity currencies over recent weeks was without merit.

Econ Grapher submits:Are upside inflation risks rising in developed economies? That's one question we look at in this week's edition. First up is a synopsis of the UK GDP figures, then a look at rising British inflation, the Bank of Canada decision and inflation rate, the surge in US producer prices, and a look at New Zealand inflation.

OTTAWA — A reversal in the year-to-year fluctuation of gasoline prices took Canada’s annual inflation rate down two-tenths of a point to 1% last month, putting the rate in line with the Bank of Canada’s expectations. The March decline takes some of the volatility out of the measure following February’s surprising 0.7 percentage point jump to 1.2%, confirming widely-held views that Canada remains in a tepid inflation environment.

OTTAWA • Financial leaders of the world’s richest countries, including Canada, are talking tough to emerging nations, warning their efforts to shore up domestic economies could lead to a currency war and possibly derail a global recovery. We . . . reaffirm our longstanding commitment to market-determined exchange rates

TORONTO — The Canadian dollar sold off for a third day on Friday amid data showing tame inflation and changing expectations for the timing of the next interest rate hike by the Bank of Canada. The currency was 0.31 of a cent lower to 99.4 cents US as Statistics Canada said that Canada’s annual inflation rate was 0.8% in December, the same as in November. On a month-to-month basis, consumer prices dipped 0.6% from November, more than economists expected. Prices on a number of key items fell in December from the previous month, including gasoline, automobiles and clothing.

Canada’s currency is the heart of a renaissance underway in business capital spending. Very recently, my Gluskin Sheff partners and I were invited to co-host an event at the Consul General’s residence in New York last week to raise awareness of Canada’s relative advantages for U.S. investors and entrepreneurs. It was a memorable evening.

OTTAWA — Higher prices for gas and autos helped push Canada’s annual inflation rate in February up to 1.2% from a three-year-low of 0.5% in January, Statistics Canada said on Wednesday. The rate, above the 0.8% predicted by market operators, is still well below the Bank of Canada’s 2.0% target. The central bank is not expected to raise rates until late in 2014. Inflation rose by 1.2% in February from January, a month-on-month jump not seen since the 1.2% recorded in January 1991, when the federal goods and services tax was introduced.

OTTAWA — The Canadian economy grew by just 0.1% in October from September, indicating a very slow start to the fourth quarter amid foreign and domestic economic woes, Statistics Canada data indicated on Friday. The figure matched analysts’ expectations. The Bank of Canada says fourth quarter growth will be 2.5% annualized but the October data confirm market suspicions the real figure will be much less impressive. Overall, output rose in 12 of 18 sectors. Service industries grew by 0.1% on strength in wholesale and retail trade while goods production was unchanged.