The Canadian dollar is trading sideways today. CAD is slightly weaker against the US dollar, the euro and the British pound. The Canadian dollar is currently the weakest against the Japanese yen. Yesterday, the currency surged to a five-week high on NAFTA-related optimism. As we wrote in our previous edition of the Canadian dollar daily update, the Trump administration is looking to conclude negotiations in two weeks time.
Turning to NAFTA news, any deal "in principle" would focus on rules governing the automotive sector. According to a Reuters report, the US is looking to conclude talks ahead of Mexican presidential elections in July. According to various sources, an announcement regarding rules of origin is likely next week. The US is demanding an increase in the North American component of vehicles to 85% (from 62.5% currently). Our short-term outlook on the Canadian dollar is neutral, while our medium-term outlook is bearish.
The USD/CAD exchange rate is currently above 1.2810. The euro is up against the Canadian dollar, with EUR/CAD currently above 1.5750. The pound is up against the Canadian dollar, with GBP/CAD trading above 1.8030.
This is a fairly light week for Canadian economic data. Markit manufacturing PMIs for March (55.7) met expectations. Tomorrow, we’ll see the trade balance for February. On Friday, we’ll see housing starts and changes in employment for March. Last week, Canadian GDP growth figures for January missed expectations.
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.