The Canadian dollar is mostly weaker today. The currency is selling off against its major peers including the US dollar, the euro and the Japanese yen. Despite ongoing weakness in the US dollar, the loonie remains weak thanks to the risk from ongoing trade discussions. Looking at recent media reports on NAFTA, the likely outcome from the talks remains unknown. While White House officials claim that President Trump would rather see NAFTA remain, Trump himself has claimed that the best deal may be to walk away from the agreement entirely. Given the close integration between the US and the Canadian economy, failure to amend NAFTA would significantly disrupt the status quo. In such a scenario, the Canadian dollar is likely to significantly weaken in order to aid the adjustment process. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2440. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5250. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7250.
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.