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Canadian dollar mixed despite rebounding risk appetite, NAFTA remains a dampener

Canadian dollar daily update

BY DEB SHAW | 

Canadian dollar daily update

The Canadian dollar is mixed today. The currency is slightly stronger against the US dollar and the British pound, while trading flat against the euro. While crude oil prices are higher today (for reasons we explain in our crude oil daily update), the Canadian dollar is not benefiting from strength in the commodity. Following the stock market rout in early February, the Canadian dollar rebound has been fairly weak. While the euro and gold have almost fully recovered, the Canadian dollar is far below its highs. Looking at USD/CAD, the pair traded around 1.2270 on February 1, 2018. Today, USD/CAD is north of 1.25 with a neutral short-term trend. Turning to NAFTA negotiations, the seventh round of talks is scheduled to begin on February 25. According to Bloomberg, talks will focus on auto content rules. President Trump is looking to increase the proportion of US auto content from 62.5 percent to 85 percent in order to revive the fortunes of US manufacturing. Canadian proposals to work around US demands failed to produce a compromise at the Montreal round of talks. US Trade Representative Lighthizer has criticized the Canadian side for slowing down negotiations, and has even suggested negotiating with Canada and Mexico separately. In general, NAFTA discussions remain fairly contentious, and this is weighing down on CAD. Our short-term outlook on the Canadian dollar is neutral, while our medium-term outlook remains bullish.          

The USD/CAD exchange rate is currently above 1.2550. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5560. The pound is down against the Canadian dollar, with GBP/CAD trading above 1.7570.

This is a fairly light week for Canadian economic data. On Thursday, we’ll see retail sales. Friday is the key day, and we’ll get the January consumer price index and core CPI. Last week, manufacturing sales missed estimates by a wide margin.

Updated 
Short term outlook
Bearish
Medium term outlook
Bearish

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