Loonie, stock indexes lose strength after positive start; oil and gold up

Canada’s dollar dipped below 70 cents US on Tuesday for the first time in almost 13 years.

Patrick Leblond, an expert in finance at the University of Ottawa, said market traders are more concerned with the fundamental challenges facing the loonie than its decline below an arbitrary price point.

On commodity markets, February crude oil futures traded at US$29.69 a barrel at about 9:30 a.m. ET and gold futures were up $21.30 at US$1.094.80.

“I really think there is a good chance that we will pierce that [70 cent USA level], and in a sustainable way go lower”, he told BNN.

David Doyle of Macquarie Capital Markets Canada Ltd. lowered his Canadian dollar forecast to 59 cents USA on Tuesday. One loonie buys about 69 USA cents. “With China and oil prices and the Bank of Canada all against the Canadian dollar, it’s sort of flat on its back right now – it’s really struggling”.

The loonie hovered around parity with the US dollar just three years ago, but has been on a steady downward march since the fall of 2014, when global oil prices first started to slump. That’s pushing the value of the USA dollar higher, he said.

“The TSX bears the brunt of any concerns about global growth”, said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver. “What we’re not getting is clear evidence of the positive effect of lower oil prices, that is a bit of a surprise and that’s what the uncertainty is increasingly now”.

The central bank cut rates twice past year to guard against oil’s collapse.

“Manufacturing and non-energy exports have far less ability to propel the economic outlook than they have in the past”, Doyle said. As it turns out, he was even a month early.

The market has increased odds the Bank of Canada will cut interest rates to 0.25 percent at its January 20 meeting to 49 percent from 17 percent on December 31, according to Bloomberg calculations based on trading in overnight index swaps. It lowered rates again in July to the current 0.5 per cent.