The Canadian dollar is lower today. The currency has now weakened for the last six trading sessions in a row. While crude oil prices are higher today, the loonie is being weighed down by trade-related fears. Last week, President Trump announced his plans to establish tariffs on all imported aluminum and steel. As Canada is a significant exporter of aluminum and steel to the United States, the Canadian dollar is weakening in response to the possibility of lower future exports. Looking at Canadian bond yields, 10-year Government of Canada bond yields have been falling more quickly relative to comparable US bonds. As the relative attractiveness of holding Canadian dollars decreases, the currency is weakening as a result. Falling yields is a sign that the bond market is betting on slower future growth and inflation. Turning to NAFTA, Canadian trade negotiators are pressing for an exemption from Trump's tariffs. As we wrote in our US dollar daily update this morning, White House representatives have stated that national exemptions are highly unlikely. Our short-term outlook is currently bearish, while our medium-term outlook in neutral. We expect to downgrade our medium-term outlook to bearish over the coming days.
The USD/CAD exchange rate is currently above 1.2890. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.5870. The pound is up slightly against the Canadian dollar, with GBP/CAD trading above 1.7790.
Looking at Canadian economic data, we'll see Ivey PMIs tomorrow. On Wednesday, we'll see housing starts and merchandise trade. More importantly, a Bank of Canada meeting is scheduled for that day. Governor Poloz will deliver his rate statement. No changes to interest rates are expected. On Thursday, we'll see housing starts, building permits and the new housing price index. We'll also hear speeches from BoC members including Poloz and Lane. On Friday, we'll see changes in employment as well as the unemployment rate. Last week, December GDP growth missed estimates.