Following the widely expected rate hike yesterday, the Canadian dollar is mostly flat against the US dollar while selling off against other currencies. The Bank of Canada flagged the risk of NAFTA negotiations in its press conference, while recent remarks from President Trump regarding the trade agreement also weighed on the currency. Trump recently tweeted that the best NAFTA deal may be ending the agreement entirely, which has caused the Mexican peso and the Canadian dollar to slide. While markets expect the Bank of Canada to continue hiking rates this year, the potential risk from ongoing trade negotiations is keeping the currency in check. In other NAFTA news, the latest round of talks in Montreal have been extended by one day. Trade negotiators face pressure to deliver tangible progress. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2420. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5210. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7270.
The Bank of Canada raised rates by 0.25% earlier this week as expected. The Bank also flagged ongoing NAFTA negotiations as a potential source of risk. Last week, the Bank of Canada's Business Outlook Survey suggested an upbeat outlook for future growth.
As the Canadian dollar strengthens, we are upgrading the currency to bullish in the medium-term. Looking at a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators on the Canadian dollar currency index.