The best news is already priced into the Canadian dollar: Rosenberg
The Canadian dollar’s recent gains may be at risk if speculators start cashing in, according to David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates.
“I’m just a little concerned right now that you’re going to see more in the way of profit taking on the Canadian dollar that limits the upside at the very least,” said Rosenberg in an interview on BNN.
The Canadian dollar has gained about 10 per cent against its U.S. counterpart since May.
Rosenberg says he remains bullish on the loonie going forward, but admits that sense of optimism has become a bit more restrained recently.
“It probably does fall back a little bit and I don’t say that because of anything negative related to the Canadian economy, it’s more about what’s already priced in,” Rosenberg said.
“You’ve got 40 per cent odds for the Fed to move rates up again by year end, you’re already fully priced in for the Bank [of Canada] to make an upward move and they probably don’t do more than that. So, as far as relative central bank policy is concerned, the best news is already priced into the Canadian dollar.”
As for the economy overall, Rosenberg says we have yet to see the full impact of a 10 per cent rise in the loonie in such a short period of time.
“A lot of this improvement in the Canadian economy was really predicated on the lagged impact of a weak Canadian dollar, the impact that had, whether it was on tourism, or whether it was on industrial export-related activity,” he said. “We’re going to see some reversal of that, given what the Canadian dollar had done in the past several months.”
Rosenberg believes the robust expansion seen in the economy is temporary and won’t be able to sustain the recent trajectory towards 3.5 per cent annual growth.
“Three and a half per cent growth is probably double what we can achieve over the intermediate term,” he said.