Canada has until Friday to decide on what it will keep or not keep in the new NAFTA agreement, the U.S. and Mexico have said they will go it alone if Canada cannot agree. One of the issues for Canada in the revised deal is the U.S. effort to dump the Chapter 19 dispute resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism. To save that mechanism, Ottawa plans to change one rule that effectively blocked American farmers from exporting ultrafiltered milk, an ingredient in cheesemaking, to Canada, the Globe and Mail reported, citing sources.
USDCAD 1.2925, 1.2905, 1.2880 1.2960, 1.2965, 1.2982
USD-CAD fell to 12-week low of 1.2887 following a Mail and Globe report, which broke during the early session in Asia, that Canada is ready to make significant concessions on diary to secure a trade deal with NAFTA. This is potentially good news as it raises the chances for Congress to approve the White House agreement with Mexico in context of a revamped NAFTA deal. Congress is widely seen as being unfavourable to ending NAFTA, and to the Trump administration’s proclivity for favouring bilateral trade agreements in place of trading blocs. The progress of the meetings of Canada’s foreign affairs minister, Freeland, in Washington today will be of major interest for market participants looking for confirmation and detail of the Mail and Globe’s report. Canada releases Q2 current account data today, which we expect to show a deficit of C$15.0 bln, improving from Q1’s deficit of C$19.5 bln on the back of a narrowing in the goods trade deficit. For now, we advise trend following with regard to USD-CAD. Trend resistance comes in at 1.2957-59, while the May low at 1.2729 provides a downside waypoint.