The Canadian dollar is once again the weakest major currency today. CAD is currently down against all major currencies. The Canadian dollar is the weakest against the Japanese yen, the euro and the US dollar. The main catalyst for the ongoing weakness is the fear of a global trade war. Following economic adviser Gary Cohn's resignation yesterday, riskier assets such as commodities and equities began selling off. The Canadian dollar was particularly weak given the country's significant trading relationship with the United States. Trump has stated that Canada will not receive an exemption on steel and aluminum tariffs unless it is willing to make concessions with regards to NAFTA. While Prime Minister Justin Trudeau spoke to Trump on the phone yesterday (a positive development), the news had a limited impact on the currency. Turning to data, strong Ivey PMIs also had a limited impact on the currency. Recent comments from US Trade Representative Lighthizer and Cohn's latest resignation are a worrying development for Canadian trade. Our short-term and medium-term outlook remains bearish.
The USD/CAD exchange rate is currently above 1.2930. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.60. The pound is up slightly against the Canadian dollar, with GBP/CAD trading above 1.7930.
Looking at Canadian economic data, Ivey PMIs (59.6 vs. 56.3 expected) were ahead of consensus estimates. Later today, we'll see merchandise trade. More importantly, a Bank of Canada meeting is scheduled for today. Governor Poloz will deliver his rate statement. No changes to interest rates are expected. On Thursday, we'll see housing starts, building permits and the new housing price index. We'll also hear speeches from BoC members including Poloz and Lane. On Friday, we'll see changes in employment as well as the unemployment rate. Last week, December GDP growth missed estimates.
As the Canadian dollar weakens, we are downgrading the currency to bearish 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.