President Trump tweeted the following this morning: “Looking forward to 3:30 P.M. meeting today at the White House. We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”
The question is, does Canada fall within this description? Markets believe that Canada will receive some kind of exemption, if so then the CAD should improve, if not, the CAD is going to get a lot worse as the NAFTA talks are still going on and both Canada and Mexico will be forced to start taxing US imports.
USDCAD 1.2910, 1.2880, 1.2860 1.2950, 1.2975 1.2995
USD-CAD has settled in the mid-to-upper 1.2800s after clocking a nine-month peak of 1.3001 earlier in the week. The pair has rallied in five of the last six weeks. The Canadian dollar managed to find its feet on news that Trump will exempt Canada, along with Mexico, from his proposed steel an aluminium tariffs, though this will be temporary and subject to how the White House sees NAFTA negotiations go. We anticipated that USD-CAD will remain in a consolidation for now. Momentum indicators had been flashing “overbought” in recent sessions following a strong rally over the last month from sub-1.2300 levels. Upcoming data out of Canada included building permits, later today, and the February employment report, tomorrow, which we project to show a 25.0k gain after the 88.0k tumble in January. Capacity utilization figures are also up tomorrow, where we expect a nudge higher to 85.2% in Q4 from the 85.0% reading in Q3, which was the strongest since Q3 2007.
EUR-USD has settled to the upper 1.2380s, trading softer today after rallying in the five previous sessions, yesterday leaving a 19-day high at 1.2446. EUR-JPY and the euro crosses have been seeing a similar price action. A Bloomberg report alleging that the ECB has lifted its 2018 growth projection had little impact on the euro, although it lifted Bund yields. The market is hunkered down ahead of the ECB announcement. No policy actions are expected, but the central bank’s forward guidance with regard to QE will be of specific interest. Market participants are also watching the development of Trump’s tariffs and global response, and ultimately what economic impact might be. EUR-USD has settled around midway levels of a range that’s been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. Support is at 1.2370-72, which is presently being tested.