The Canadian dollar is mixed today. CAD is currently strengthening against the US dollar, while selling off against the yen and the euro. Yesterday, the currency staged a comeback against the US dollar as "risk-on" assets enjoyed a relief rally. The Canadian dollar managed to rise despite greatly disappointing GDP growth figures. While Canada's economic growth was accelerating in 2017, the outlook for this year is far more cloudy. Following recent strength, we have upgraded our short-term outlook on the Canadian dollar to neutral.
Turning to the latest NAFTA news, Finance Minister Bill Morneau said that "NAFTA renegotiations are actually going well" during a lunch hosted by the Canadian Chamber of Commerce in Hong Kong. Morneau also said that Canada's exemption from US steel and aluminum tariffs suggested that ties between the countries remain strong. Our short-term outlook on the Canadian dollar is neutral, while our medium-term outlook is bearish.
The USD/CAD exchange rate is currently above 1.2860. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.5860. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.8080.
This is a relatively light week for Canadian economic data. MoM Canadian GDP growth (-0.1% vs. 0.1% expected) missed expectations. Last week, year-over-year inflation was higher than expectations.