The Canadian dollar is mostly higher today. CAD is currently the strongest against safe haven currencies including the Japanese yen and the US dollar. Yesterday, the currency began strengthening after Larry Kudlow (a White House economic official) noted "good progress" related to NAFTA talks and added that there should "much greater currency cooperation" between the United States and Mexico. The Canadian dollar was also helped by the Bank of Canada's business outlook survey, which suggested that most businesses expect sales to continue accelerating.
Turning to the latest news, Mexico's economy minister claimed that a NAFTA deal is likely by May. Specifically, he said the odds of a deal were 80% during a televised interview on the Televisa Network. While no "in principle" deal is likely at the upcoming Lima summit, the Canadian dollar continues to strengthen thanks to NAFTA-related optimism and expectations for another rate hike in May. Rate hike expectations accelerated after the Bank of Canada's business outlook survey was published. The document suggests "capacity and labour pressures" in most regions, paving the way for the BoC to hike rates. Thanks to recent strength in the Canadian dollar, we may upgrade our outlook on the currency to neutral shortly. For now, 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 1.2650. The euro is down slightly against the Canadian dollar, with EUR/CAD currently above 1.5630. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7940.
This is a light week for Canadian economic data. The Bank of Canada's business outlook survey suggested that most businesses were optimistic regarding future sales. Later today, we'll see housing starts for March and building permits for February. On Thursday, we'll see the new housing price index for February. Last week, changes in employment were ahead of expectations.