Economy

TORONTO (Reuters) – The Canadian dollar is set to strengthen over the coming year if the Federal Reserve shifts to cutting interest rates as expected and the U.S. economy slows without slipping into recession, a Reuters poll found.In the March 1-6 poll of 40 foreign exchange analysts the median forecast was for the loonie to strengthen 1.4% to 1.34 per U.S. dollar, or 74.63 U.S. cents, in three months, matching the forecast in February’s poll.It was then predicted to advance to 1.30 in a year, also matching the previous month’s forecast. The expected strengthening comes as some analysts forecast broad-based declines for the U.S. dollar.”The gradual decline in USD-CAD certainly in part reflects a slowing U.S. economy and the Fed embarking on a rate cutting cycle,” said Derek Halpenny, head of research, global markets EMEA and international securities at MUFG.”We also assume no hard landing (for the economy) and if risk remains broadly favourable this year that should also benefit CAD.”Canada is a major exporter of commodities, including oil, so the loonie tends to be sensitive to swings in investor sentiment.Still, roughly 75% of Canada’s exports go to the United States so slower U.S. growth may not be a recipe for Canadian dollar strength against Group of Ten currencies other than the greenback, say analysts.”A slowing economy in the U.S. and a weakening U.S. dollar tends to result in CAD underperformance vs other G10 currencies,” Halpenny said.The Bank of Canada is also expected to begin a rate cutting campaign this year as the economy slows and inflation cools.Analysts expect the Canadian central bank to leave its benchmark interest rate on hold at a 22-year high of 5% on Wednesday and at the following policy decision in April but to then start cutting in June, a recent Reuters poll showed.(For other stories from the March Reuters foreign exchange poll:) More

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In an event hosted by consultancy firm APCE, the monetary policy director, Gabriel Galipolo, said given the way that the disinflation process and the pace of rate cuts have been unfolding, an eventual change in guidance does not mean a correlation with a terminal rate.”The absence of a signal from Copom about the terminal interest rate stems from the fact that we adopted the 50-basis-point pace precisely to take advantage, gain time and see how things will unfold,” he said.The central bank kicked off its easing cycle in August with a 50-basis-point cut after nearly a year of unchanged rates at a six-year high of 13.75%, aimed at combating inflation.Since then, it has consistently signaled the maintenance of the same easing pace for the meetings ahead.Galipolo highlighted that, despite the reduction in the differential between the country’s interest rates and those of advanced countries, which have been delaying the start of their own interest-rate-easing cycles, Brazil’s exchange rate has performed well.”Even with this differential closing, the exchange rate has remained at a good level,” he said.Asked if the central bank had a target for the exchange rate, Galípolo denied the existence of a goal, arguing that a floating exchange rate is an important “line of defense.” Last week, the central bank’s director said that “at some point” policymakers will need to remove the use of the plural in their monetary easing guidance, which has been flagging 50 basis point cuts for the upcoming “meetings”.Brazil’s benchmark interest rate now stands at 11.25%. More

Data from the Australian Bureau of Statistics on Wednesday showed real gross domestic product (GDP) rose 0.2% in the fourth quarter, under forecasts of 0.3%. That compared with a upwardly revised 0.3% expansion in the prior quarter. Annual growth slowed to 1.5%, down from 2.1% the previous quarter and the lowest since early 2021, when the economy was emerging from a pandemic-driven recession. In a telling sign of the softness in domestic demand, household spending did not add to economic growth at all in the fourth quarter, as a 0.7% rise in spending on essentials was offset by a 0.9% fall in discretionary spending. “Households upped their spending on essential items like electricity, rent, food and health,” said Katherine Keenan, ABS head of national accounts.”Meanwhile they wound back spending in discretionary areas including hotels, cafes and restaurants, cigarettes and tobacco, new vehicle purchases and clothing and footwear.”Moreover, GDP per capita fell 0.3% in the fourth quarter, shrinking for three straight quarters in the longest declining streak since 1982.While the household saving ratio did rebound 3.2%, it was still subdued after a rise of 1.9% in the previous quarter. For the December quarter, net trade was a big driver of growth, with a pull-back in imports – thanks to more Australians spending less money overseas – adding 0.7 percentage points to GDP growth. The economic slowdown has followed aggressive monetary tightening by the Reserve Bank of Australia as policymaker look to bring inflation back to its 2-3% target range. The central bank had expected the economy to slow to an annual 1.5% by the end of the last year and 1.3% by mid 2024. The RBA last month kept interest rates steady at 4.35%, having raised them by 425 basis points since May last year. Consumer inflation held at a two year low of 3.4% in January, adding to signs that rates wouldn’t go any higher. Markets are confident that the tightening cycle is over, although future pricing show that any rate relief won’t come until around August. More

NEW YORK (Reuters) – New York Attorney General Letitia James sued the cash advance provider Yellowstone Capital for $1.4 billion on Tuesday, saying it ran a large-scale predatory lending operation that charged “sky-high” interest rates on fraudulent loans.The complaint accused Yellowstone, now known as Delta Bridge Funding or Cloudfund, of falsely stating they would buy specified percentages of merchants’ future revenue, known as receivables, while giving merchants the flexibility to pay off advances over longer periods if business slowed down.James said the defendants instead debited fixed sums from merchants’ bank accounts over short periods, typically 60 or 90 business days, resulting in “unconscionable” effective interest rates that regularly reached triple digits and have hit 820%.New York’s maximum interest rate that isn’t considered usurious is 16%.James said City Bakery, a former Yellowstone customer near Manhattan’s Union Square, closed after 29 years in business in 2019, felled by huge debts to the company and a surprise increase two years earlier in its payment obligations.Lawyers for Yellowstone and Delta Bridge did not immediately respond to requests for comment on behalf of the 37 corporate and individual defendants in James’ 281-page complaint.The lawsuit filed in a New York state court in Manhattan seeks to recoup illegal interest and fees, impose a $5,000 civil fine for each fraudulent merchant cash advance, and ban Yellowstone co-founder David Glass from the industry.Five individual defendants settled for $3.37 million and accepted industry bans, James said.”Small businesses are the foundation of our economy,” James said. “They face severe challenges without also having predatory lenders taking advantage of them.”Glass and co-defendant Yitzhak Stern co-founded Yellowstone in 2009, the year after Glass pleaded guilty in an insider trading case. He was sentenced to probation.In 2021, Yellowstone agreed to pay $9.8 million to settle U.S. Federal Trade Commission charges it made unauthorized bank withdrawals and misled businesses about its financing.Last December, Yellowstone agreed to pay $5.6 million and forgive $21.8 million of debt to resolve claims by New Jersey’s attorney general that it deceived businesses. More

(Reuters) – A former owner of a Massachusetts compounding pharmacy whose mold-tainted drugs sparked a deadly U.S. fungal meningitis outbreak in 2012 has pleaded no contest to involuntary manslaughter charges over the deaths of 11 Michigan residents.The plea by Barry Cadden, the former president of New England Compounding Center, was announced on Tuesday by Michigan Attorney General Dana Nessel and resolves a criminal case her office brought against him in state court in 2018.The state’s charges came after federal juries in Boston in 2017 convicted Cadden and NECC’s supervisory pharmacist, Glenn Chin, of racketeering and fraud but cleared them of second-degree murder over 25 deaths nationally caused by tainted drugs the company produced.Prosecutors said those deaths stemmed from a fungal meningitis outbreak traced back to mold-tainted steroids that Framingham, Massachusetts-based NECC produced in filthy and unsafe conditions and sold to hospitals and clinics nationally.The outbreak sickened 793 patients, more than 100 of whom have died, prosecutors said.Prosecutors in Michigan, a state that was among the hardest hit during the outbreak, following the federal trials then charged Cadden and Chin with 11 counts each of second-degree murder over deaths in their state.Nessel in a statement said her office “worked closely with the families of these victims, and we’ve ensured that this plea fits their desire for closure and justice.”Under the terms of the plea deal, Cadden, 57, on Monday pleaded no contest to manslaughter charges and agreed to be sentenced to 10 to 15 years in prison, which would run concurrently with his already-imposed federal sentence of 14-1/2 years.That federal sentence relates to misrepresentations that prosecutors say Cadden made to NECC customers about its drugs.He is scheduled to be sentenced by a judge in Livingston County, Michigan, on April 18. A lawyer for Cadden did not immediately respond to a request for comment.Charges in Michigan remain pending against Chin, who has pleaded not guilty and is serving a 10-1/2 year federal sentence. His lawyer declined to comment. More