Currency exchange rates are affected by the global economy. That’s why every week at theCurrent we bring you the world’s biggest business stories. This week: the loonie and oil are on the rise, billionaire investor drops Apple, Canadian and US GDP falls, and EU GDP growth doubles.
Loonie flying high
The loonie hit 80 cents US this week. Canada’s currency reached the value this Friday, the highest it has been in nearly 10 months. Not since June of last year has the loonie broke the 80 cent barrier. A recent resurgence in oil prices has contributed to the recovery, as have signals from the US Federal Reserve that the central bank will not raise interest rates. (Source: http://business.financialpost.com/news/economy/forget-justin-trudeau-its-oil-thats-driving-this-loonie-rally)
Track the loonie’s rise for yourself with Continental’s free Rate Watch app.
Crude oil rose 70 cents on Thursday to US $46.03 a barrel. Overall the black stuff is set for its biggest monthly rise in 7 years. Despite the rise in oil prices many oil producers are continuing to cut capital expenditure, and could increase cutbacks on production. These cutbacks could help to boost the price of oil, and therefore the Canadian dollar. (http://www.reuters.com/article/us-global-oil-idUSKCN0XQ02V)
Billionaire investor Carl Icahn sold his stake in Apple this week following the company’s first reported revenue decline in over 10 years. Icahn’s sale dragged Apple’s share price down 3% to US $94.81. (Source: http://www.bbc.co.uk/news/business-36166867)
US GDP grew just 0.5% in Q1 of 2016, down from 1.4% growth in the final three months of 2015. Gross domestic product is seen as one of the most reliable indicators of economic health. Low GDP could encourage the Fed to continue low interest rates. Low interest rates make borrowing money cheaper, and by doing so (it is hoped) spark lending and economic growth. Low interest rates also devalue currency, holding the US dollar back. (Source: http://www.wsj.com/articles/u-s-first-quarter-gdp-advances-at-0-5-pace-1461846715)
Canada’s GDP slips
Canada’s GDP shrank by 0.1% in February. The loss is a blow to the economy but still surpasses economists expectations. Experts had suggested that Canada’s economy would shrink by 0.2%, double the actual figures. It is the first time in 5 months that Canada’s economy has shrunk, and comes just a month after posting 0.6% growth in January – the best month since 2013. (Source: http://www.bloomberg.com/news/articles/2016-04-29/canada-gdp-shrinks-less-than-expected-on-february-retail-gains)
Eurozone Exceeds Expectations
The eurozone also exceeded expectations, growing by 0.6% in the first quarter of 2016. The numbers are double the 0.3% posted in the final three months of 2015 and well above economist’s predictions of 0.4% growth. The 19 nation bloc’s unemployment rate also fell to 10.2% in March. Low oil prices have benefited the eurozone along with the ECB’s policies. (Source: http://www.theguardian.com/business/live/2016/apr/29/eurozone-gdp-growth-france-germany-inflation-unemployment-live)
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