Trade-war risks to the global currency market
The lower loonie has Canadians rethinking their summer travel plans.
In a recent BNN.ca poll, 40 per cent of respondents said they would stay in Canada for their summer vacation as a result of a weaker dollar, while 45 per cent said the state of the currency won’t impact their plans.
The currency was trading higher Friday on strong inflation data after struggling amid trade uncertainty and dovish Bank of Canada outlook. However, some economists predict the loonie hasn’t hit its bottom yet.
One currency analyst pointed to the uncertainty south of the border as a key catalyst that has been driving the dollar lower recently.
“I think there are lot of headwinds for the Canadian scenario – it’s not a good a good scenario,” said Adam Button, chief currency analyst at ForexLive, in an interview with BNN, referring to ongoing trade trade tension with the U.S.
But a lower dollar isn’t all bad news, with one strategist explaining the economy can benefit if Canadians stay home and spend.
“I think there may be a bit of a boost to the economy from staycations. Of course there’s always a benefit to any consumers staying home,” Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets, told BNN in an interview. “I think in the context of the depreciation in the currency, I think we can and may well see further down drops towards the 75 cent US mark.”
WHERE TO GO
While Canadians grapple with a lower dollar as they plan their summer holidays, there are destinations to consider that may be more affordable.
Travel search site KAYAK said flights from Canada to Europe have gone up this year, whereas domestic flights have started to see a price drop with the introduction of new low-cost carriers, like WestJet’s Swoop.
“When it comes to international travel, flying out of Canada is notoriously expensive,” Steve Sintra, Canada Country Manager at KAYAK, told BNN in an email. “And with the loonie at a historic low, budget-savvy travellers may not be up for traveling overseas anytime soon.”
KAYAK’s data shows median airfare to Europe this summer has risen eight per cent since last year – about $1,036 – which Sintra said is the highest it has been in three years.
“Flying within Canada has been a similar experience, but that is all about to change as the country prepares for new low-cost carriers to kick off service this summer.”
Sintra said the combination of added flight routes with the arrival of new low-cost carriers may already be having an impact on domestic flights with prices down seven per cent compared to last year. Flights to and from cities like Edmonton, Abbotsford, Winnipeg and Hamilton have seen price drops between 25-to-40 per cent this year.
“Travellers looking to save a little on the ground, should look for locally-owned accommodation such as lodges or guest houses,” Bruce Poon Tip, founder of travel company G Adventures, told BNN via email. “Seeking out locally-owned restaurants, local transport, and local guides ensures the money stays in the community, and can also help travellers save along the way."
However, he still encourages Canadians to not let the weaker dollar deter them from making plans to go abroad, especially in places like Vietnam, Kenya, or Argentina where the currencies are still showing good value against the loonie.
"There are still plenty of great value options for Canadians looking to get away this summer, so don’t let the weak loonie stop you,” he said.
If you do intend on travelling internationally this summer but want to stay closer to home, KAYAK says the cheapest places for Canadians to go are cities south of the border. Here’s a look at the 10 most affordable destinations based on median round-trip economy airfare for travel dates between May 25, 2018 and Sept, 3, 2018:
1.Boston, MA., $328
2.New York, NY, $367
3. Chicago, Ill., $394
4. Denver, Colo., $394
5. Phoenix, Ariz., $397
6. Fort Lauderdale, Fla., $320
7. Los Angeles, Calif., $412
8. Tampa, Fla., $320
9. San Diego, Calif., $414
10. Las Vegas, NV., $438