Loonie headed to 75 cents by autumn:BMO

In a Friday (July 22) report, the bank pointed to declining commodity prices, China’s economic cool-down, sustained strength of the U.S. greenback and the changing policy of the Bank of Canada (BoC) as factors driving the decline.

BMO chief economist Douglas Porter said in the report the stronger U.S. dollar and the BoC’s recent benchmark rate cuts would likely continue to keep the dollar low in the second half of 2015.

“However, we look for an eventual firming in oil prices and a return to positive growth to help put a floor under the currency later this year and into 2016,” he said.

“Even so, we expect the (loonie) to average little better than 78 cents for all of next year.”

BMO forecasts the Canadian dollar will eventually reach US$0.80 in the medium-term or “roughly 15% below the median of the past 10 years.”
“For all the talk about how a weaker exchange rate helps boost growth, that’s purely a net export story,” the report said.

“There is no ambiguity about how a weaker currency affects Canadian consumers — it is bad news, period.”

But the situation is different for Vancouver, where house prices have increased 8.4% on a year-over-year basis as of June, according to data from the Canada Real Estate Association.

Statistics Canada released retail data earlier this week showing that just as housing prices have gone up, so too have sales of household-related spending in B.C.

Furniture and furnishings sales are up 20.8% in May compared with the same period a year ago. Sales of building materials and gardening supplies have also increased substantially over the same time, up 22.4%.

The only other region with a comparable story is Toronto, which has seen house prices climb 8.4%, year-over-year, at the same time retail sales have risen 5%.

National retail sales have only risen 1.7% between May 2015 and May 2015.

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