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Canadian dollar mixed as NAFTA progress remains elusive

Canadian dollar daily update


Canadian dollar daily update

The Canadian dollar is currently mixed. The loonie is flat against the US dollar, while trading slightly higher against the British pound and the Japanese yen. The loonie is slightly weaker against the euro. Yesterday, the Canadian dollar ended the day slightly higher relative to its US counterpart. Trading volumes in Canadian dollar futures were flat yesterday, and remain in line with 30-day averages. Today's USD/CAD trading range is 1.2890 - 1.3230. 

In yesterday's Canadian dollar update, we wrote that the currency was approaching the bottom-end of yesterday's trading range. After tapping the bottom-end of our indicated range (1.2890), the pair found support and moved higher. Looking at options markets, forward-looking implied volatility is currently in line with 30-day realized volatility. This is a sign that traders are neither complacent nor excessively bearish on the loonie. While the currency continues to benefit from recent weakness in the US dollar, the lack of tangible progress relating to NAFTA remains a significant near-term concern. 

Turning to NAFTA, yesterday's talks in Washington ended without any significant progress. Canadian Foreign Minister Chrystia Freeland returns to Montreal today for a conference with female foreign ministers. While she is scheduled to return to the US next Monday, she will be speaking at a United Nations session. According to a Reuters report on the subject, Canadian officials are also looking for the US to withdraw the threat of tariffs targeting Canadian auto imports. 

Later today, we'll see Canadian inflation data. As have we have noted previously, rising Canadian inflation has stoked rate hike expectations (in turn helping the loonie). Our outlook on the Canadian dollar remains neutral.

The USD/CAD exchange rate is currently above 1.2910. The euro is up slightly against the Canadian dollar, with EUR/CAD currently above 1.5220. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.170. CAD/JPY is up slightly, and currently trading above 87.20. 

Date Event Actual Previous
September 17 New Motor Vehicle Sales JUL 179.6K 204.4K
September 18 Manufacturing Sales MoM JUL 0.9% 1.3%
September 20 ADP Employment Change AUG 13.6K 35.5K
September 20 BoC Review
September 21 Core Inflation Rate YoY AUG 1.6%
September 21 Inflation Rate YoY AUG 3%
September 21 Retail Sales YoY JUL 3.8%

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