The Canadian dollar is mixed today. While the currency is currently strengthening against the US dollar, it remains weak against the euro and the British pound. Following the Bank of Canada's rate hike last week, markets continue to question whether recent strength in the Canadian dollar can be justified. Looking at monetary policy, slowing growth and inflation are likely to tame expectations for two more rate hikes in 2018. Secondly, the ongoing NAFTA negotiations remain a significant risk for Canada given its close integration with the US economy. If the US walks away from the agreement, the currency is likely to sharply weaken in order to aid the adjustment process. Looking at the latest news, Canadian trade negotiators believe that it's only a matter of time until the US pulls out of the agreement. According to CTV News, the Canadian government is making plans for a post-NAFTA world. Our short-term and medium-term outlook on the currency remain bullish.
The USD/CAD exchange rate is currently above 1.2470. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5270. The pound is flat against the Canadian dollar, with GBP/CAD trading above 1.7330.
Looking at economic data this week, markets will be watching retail sales and inflation figures. On Thursday we'll get retail sales figures. On Friday we'll see inflation numbers. Last week, the Bank of Canada raised policy rates to 1.25%.
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.