Canadian dollar posts 6-week high as focus shifts to Fed decision - Reuters News
Canadian dollar posts 6-week high as focus shifts to Fed decision - Reuters News
- Canadian dollar strengthens 0.3% against the greenback
- Touches its strongest since March 18 at 1.2432
- Price of U.S. oil falls 1.9%
- Canadian bond yields rise across the curve
TORONTO, April 26 (Reuters) - The Canadian dollar strengthened to its highest level in nearly six weeks against the greenback on Monday as investors weighed the prospects of the U.S. Federal Reserve maintaining its dovish stance at a policy meeting this week.
Most analysts expect Fed Chairman Jerome Powell to say on Wednesday that talk of withdrawing monetary easing is premature, which could put downward pressure on Treasury yields and the U.S. dollar .DXY. (Full Story)
In contrast, the Bank of Canada last week signaled it could start hiking interest rates next year and cut the pace of bond purchases. (Full Story)
Investors in Canada are shunning interest-rate sensitive stocks, seeking inflation protection and betting on a steeper yield curve as the Bank of Canada leads global central banks in shifting to a more hawkish stance. (Full Story)
The Canadian dollar CAD= was trading 0.3% higher at 1.2439 to the greenback, or 80.39 U.S. cents, having touched its strongest intraday level since March 18 at 1.2432.
Speculators have raised their bullish bets on the Canadian dollar to the highest in seven weeks, data from the U.S. Commodity Futures Trading Commission showed on Friday.
As of April 20, net long positions had increased to 13,246 contracts from 2,406 in the prior week.
The price of oil, one of Canada's major exports, fell on fears that surging COVID-19 cases in India will dent fuel demand in the world's third-biggest oil importer. U.S. crude CLc1 prices were down 1.9% at $60.95 a barrel. (Full Story)
Canadian government bond yields edged higher across the curve. The 10-year CA10YT=RR was up nearly one basis point at
1.526%.
Canadian retail sales data for February is due on Wednesday, while GDP data for the same month is due on Friday.
U.S. core capital goods orders; shipments rise solidly in March - Reuters News
- Core capital goods orders increase 0.9%
- Core capital good shipments rebound 1.9
- Durable goods orders rise 0.5%
By Lucia Mutikani
WASHINGTON, April 26 (Reuters) - New orders for key U.S.-made capital goods rose solidly in March and shipments surged, cementing expectations that economic growth accelerated in the first quarter as massive government aid and improving public health boosted demand.
The report from the Commerce Department on Monday joined upbeat data on retail sales and the labor market in positioning the economy for what analysts expect will be its strongest performance this year in nearly four decades.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 0.9% last month. These so-called core capital goods orders fell 0.8% in February after bitterly cold temperatures gripped large parts of the country. Economists polled by Reuters had forecast core capital goods orders increasing 1.5% in March.
"With demand being boosted by fiscal stimulus, corporate borrowing costs still low and the manufacturing new orders surveys going from strength to strength, we expect investment to continue expanding at a robust pace this year," said Andrew Hunter, a senior U.S. economist at Capital Economics.
Core capital goods orders surged 10.4% year-on-year in March.
Reports this month showed retail sales raced to a record high in March while the economy created the most jobs in seven months. Factory activity measures are at multi-year highs, indication continued for manufacturing, which accounts for 11.9% of the U.S. economy.
The White House's massive $1.9 trillion COVID-19 pandemic rescue package and increased vaccinations against the virus have allowed for broader economic re-engagement, unleashing pent-up demand, for both goods and services.
Households have accumulated at least $2 trillion in excess savings. With demand booming and inventories low, businesses are likely to continue investing in equipment to boost production, though raw material and input shortages could be an issue.
In March, core capital goods orders were boosted by machinery, primary and fabricated metal products, as well as computers and electronic products. But orders for electrical equipment, appliances and components dropped 1.5%.
Shipments of core capital goods rebounded 1.3% last month. Core capital goods shipments are used to calculate equipment spending in the government's GDP measurement. They dropped 1.1% in February.
The dollar was steady against a basket of currencies. U.S. Treasury prices were lower.
STRONG BUSINESS INVESTMENT
Business investment on equipment surged in the second half of last year. The strong growth pace is expected to have prevailed in the first and persist through the remainder of this year, driven by pent up demand amid low inventories at businesses.
The government will publish its snapshot of first-quarter GDP on Thursday. According to a Reuters survey of economists the economy grew at a 6.1% annualized rate in the January-March quarter. That would be the a second fastest growth pace since the third quarter of 2003 and would follow a 4.3% rate of expansion in the final three months of 2020.
The economy grew at record 33.4% pace in the third quarter of 2020 after contracting at a historic 31.4% rate in the April-June period. Growth is expected to top 7.0% this year, which would be the fastest since 1984. It would follow a 3.5% contraction last year, the worst performance in 74 years.
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.5% in March after falling 0.9% February. They were restrained by a 1.7% decline in orders for transportation equipment, which followed a 2.0% drop in February.
Orders for civilian aircraft tumbled 46.9%. That was despite Boeing BA.N reporting on its website that it had received 196 aircraft orders last month compared to 82 in February. Last month's orders included 185 737 MAX jets. The U.S. government late last year lifted a 20-month grounding of the aircraft that was put in place after two crashes in Indonesia and Ethiopia.
Orders for motor vehicles and parts shot up 5.5% in March after plunging 9.1% in February. Motor vehicle production has been hit by a global semiconductor chip shortage. Output of computers and electronic products also has been impacted.
Third COVID wave, supply bottlenecks hold back German recovery - Ifo - Reuters News
- Ifo business climate index edges up to 96.8
- Much smaller increase than expected
- Coronavirus curbs impair service sector
- Supply bottlenecks hit manufacturers
By Michael Nienaber
BERLIN, April 26 (Reuters) - German business morale improved only slightly in April as a third wave of COVID-19 infections and a semiconductor shortage in the motor vehicle sector slowed a recovery in Europe's largest economy, a survey showed on Monday.
The Ifo institute said its business climate index edged up to 96.8 from 96.6 in March. A Reuters poll of analysts had pointed to a bigger increase to 97.8.
"Both the third wave of infections and bottlenecks in intermediate products are impeding Germany's economic recovery," Ifo President Clemens Fuest said in a statement.
Germany is struggling to contain an aggressive third wave of COVID-19 as efforts have been complicated by the more contagious B117 variant, first discovered in Britain, and a relatively slow introduction of vaccines against the pandemic.
Companies raised their assessment of the current business situation once again, but they were less optimistic about the coming six months, the Ifo survey showed.
The business climate in manufacturing improved further to reach its highest level in nearly three years, with industrial companies reporting full order books and humming factories.
"The demand situation is still very good," Fuest said.
But the business outlook was less optimistic as 45 percent of companies reported bottlenecks in intermediate products, the highest such figure since 1991, the institute said.
"There are bottlenecks with semiconductors, for example, but also with many other products. There is sand in the engine when it comes to procurement, across almost all industries," Ifo economist Klaus Wohlrabe told Reuters.
Germany's big car makers are struggling to ramp up production due to a global shortage of semiconductors which has exposed the sector's dependency on a few Asian suppliers, and its vulnerability to any interruptions to supply from them.
Volkswagen AG VOWG_p.DE has warned managers to prepare for a bigger production hit in the second quarter than the first due to the chip shortage, the Financial Times reported on Sunday. (Full Story)
The Ifo figures were broadly in line with the PMI survey from last week that showed factories continued to churn out goods at a near-record pace in April while activity in the services sector remained sluggish. (Full Story)
The government is expected to raise its 2021 GDP growth forecast on Tuesday after Economy Minister Peter Altmaier hinted earlier this month that Berlin was mulling an upward revision to the 3% estimate it presented in January. (Full Story)
The Statistics Office will release its first estimate for gross domestic product in the first quarter on Friday.
Andrew Kenningham at Capital Economics said the Ifo survey showed that the economy was treading water at the beginning of the second quarter.
"We expect to learn on Friday that GDP contracted by around 1.0% q/q in Q1 and we think the economy will do no more than flatline in Q2," Kenningham said.
Still, Germany should be able to stage a sustained recovery from the third quarter onwards and is likely to be the first big euro zone economy to regain its pre-pandemic level, probably in the course of the first half of 2022, he added.
