Loonie dives on jobs report and oil price decline..

The Canadian economy does not seem to be weathering the economic storms as well as some people thought. The declining oil price will hurt our energy stocks but on the other hand it will help the consumer and companies that depend upon fuel and petroleum products. Also, the declining dollar may eventually help exporters a little. But at the same time the price of our imports will go up and cross-border shopping will be less attractive.



Loonie dives on jobs report, oil

VIRGINIA GALT
Globe and Mail Update
August 8, 2008 at 9:51 AM EDT
The Canadian loonie dove to 93.62 cents (U.S.) Friday morning from Thursday's close of 94.97 cents within minutes of Statistics Canada's report that the Canadian economy lost 55,200 jobs in July.
The currency was battered by the “one-two punch combination of the shockingly weak jobs report and crude oil continuing to retreat…and there is no sign of any let up in that regard,” said Patricia Croft, chief economist at Phillips Hager & North.
The employment report – marking the biggest job loss in 17 years – “really caught people off guard,” Ms. Croft said in an interview.
“Canada has been considered a bastion of economic stability, unlike the U.S., the U.K., Europe, Japan, which are already in recession or heading that way. Canada, until recently, has held up quite well, but this jobs report is a sign that it's our turn now,” she said.

The Royal Bank said in its morning commentary that a sharp rally in the U.S. dollar, falling crude oil prices and a weak Canadian employment report “all served to conspire against the Canadian dollar.”
Bank of Nova Scotia currency analysts noted that the Canadian jobs report came on the heels of a Statistics Canada's announcement Thursday that the value of building permits issued in June was down by 5.3 per cent, with declines in both the residential and non-residential sector. Economists had forecast a decline of 1 per cent.
“We're starting to see surprises in Canadian economic indicators coming in on the downside,” Ms. Croft said.
“But the key is the employment report. It's all about the consumer, and consumer confidence is driven by the employment outlook and by income, of course. There are signs now that what had been a very solid support for Canadian consumers is …fraying around the edges.”
The U.S. dollar, meantime, is at a five-month high. “There's a very strong correlation between the U.S. dollar and oil,” Ms. Croft said.