The Canadian dollar soared on Friday as North American markets continued to react to the US Federal Reserve’s new inflation-tolerant monetary policy, revealed Thursday in a speech by President Jerome Powell.
The Canadian dollar traded at 76.35 US cents from 76.17 US cents on Thursday, and an analyst predicted that it may continue to strengthen.
“In Powell’s message, you can infer a continued devaluation of the US dollar. As this is perhaps becoming an informal policy, as a side effect of this policy, we expect the Canadian dollar to continue to rise, ”said Philip Petursson. Chief Investment Strategist at Manulife Investment Management.
“We have a short term target of 77 cents US (over the next few days)… but we’re going higher, at 79 cents, over the next six months. ”
Canada’s main stock index closed slightly lower on Friday, although it gained about 1.1 percent on a week-to-higher basis.
The S & P / TSX Composite Index fell 25.70 points to 16,705.79 on Friday, dragged down by the consumer staples, financials and utilities sectors, but was pulled higher by the actions of gold, cannabis and energy.
Losers for the day included Alimentation Couche-Tard Inc., down 2.58 percent to $ 43.74; George Weston Ltd., down the same amount to $ 96.15; and Brookfield Renewable Partners LP, a reduction of 2.57% to $ 60.54.
Most financial stocks fell except for CWB Financial Group, owner of Canadian Western Bank, whose shares jumped 7.59 percent to $ 27.37 after beating analysts’ expectations with its results. quarterly.
The December gold contract rose US $ 42.30 to US $ 1,974.90 an ounce, a move linked to the outlook for higher inflation thanks to the Fed’s more flexible stance, said Petursson.
Mining companies led the materials sector to a gain of 2.27%, Silvercorp Metals Inc. up 7.63% to $ 10.86, while intermediate oil and gas producers led the sector in energy on the rise.
In New York, the Dow Jones Industrial Average rose 205.40 points to 28,697.67.
The S&P 500 was up 24.16 points at 3508.71, while the Nasdaq Composite was up 78.76 points at 11,704.10.
US markets have developed a split personality, noted Petursson, but only one side is drawing attention.
“Both sides are, on the one hand, the belief that the Fed will continue to be dovish for years to come and therefore it can only be good for stocks,” he said.
“But there’s another side to that and that’s if the Fed lets inflation run hot, it tends to cap the P / E multiples (price / earnings) and, in fact, historically, as the inflation is rising, it squeezes your multiple P / E – and that seems to be being completely ignored at the moment. ”
He warned that September and October are historically the two weakest months for US markets.
“A correction fits well with normal market activity, especially at this time of year, especially with an upcoming (presidential) election,” he said. “This is something that I think investors shouldn’t be surprised about and, if it comes to pass, should be positioned to profit from it. ”
On Friday, the October natural gas contract fell five cents to about US $ 2.66 per mmBTU and the December copper contract rose nearly three cents to US $ 3.02 per pound.