The Canadian dollar is currently mixed. The loonie is strengthening against the euro, the British pound and the yen, while selling off against the US dollar and the Australian dollar. Yesterday, the currency moved higher against European currencies and the yen but ended slightly lower against the US dollar. CAD/JPY continues to trade just below overbought levels.
The latest NAFTA news remains disappointing. US Trade Representative Robert Lighthizer said that the three sides were "nowhere near" a deal following optimistic comments from Prime Minister Justin Trudeau. The May 17 deadline (for the US Congress to receive the agreement) has now passed. While there is some hope for some wiggle room on the deadline, there are few public indications that the three sides can quickly come to an agreement. Canadian Foreign Minister Chrystia Freeland was in Washington yesterday, and met with labor union officials as well as members from the US Chamber of Commerce.
Looking more broadly at the Canadian dollar, the currency remains in limbo. The crude oil bull market is running out of steam with Brent near $80/barrel, while the outlook for NAFTA remains unclear. As a crude oil exporter with close ties to the United States, the outlook for the Canadian economy is not as bearish relative to European countries or those with closer ties to emerging markets. This being said, year-over-year Canadian GDP growth continues to decelerate, while traders remain bullish on future rate hikes. Our short-term outlook on the loonie remains neutral, while our medium-term outlook remains bearish.
The USD/CAD exchange rate is currently above 1.2810. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5090. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.7280.
In this week’s Canadian dollar economic calendar, we’ll see retail sales and inflation figures for April. The BoC’s Schembri said that Canada's expansion can continue without fueling inflation thanks to the severity of the 2008 global financial crisis. Cross-border portfolio investments suggest capital inflows into Canada (+$4.3b CAD). Later today, the most important day, we’ll see retail sales for March and the consumer price index for April. Last week, Canadian employment figures for April missed expectations.