US trade representative Robert Lighthizer has recently stated that the three countries involved in the NAFTA agreement - the US, Canada and Mexico - aren't close to reaching agreement on a new deal. This is likely to impact the CAD long term, with President Trump even intermating that he wishes to make seperate trade agreements with Mexico and Canada. The Canadian Dollar report below discusses the way in which this could affect the trade relationship between the three countries and in turn the Loonie. The table below shows the difference in CAD you could have achieved when buying £200,000.00 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
Yesterday was a positive day for the Canadian dollar as Canada’s trade deficit for April dropped to $1.9bn from $3.93bn. The reason for the fall is that exports have risen to a record high and imports have dropped. However it’s not all positive news for the Canadian dollar as the NAFTA negotiations are back in the spotlight and just recently US Trade Representative Robert Lighthizer stated the three countries (US, Canada and Mexico) are not close to securing a deal. This is no surprise as it was only last month US President Donald Trump announced further tariffs on Canadian and Mexican steel and Aluminium.
With Mexico’s election less than three weeks away, Donald Trump has now stated that the US may start to negotiate with Canada and Mexico separately, however I find it difficult to see how this would work, as Mexico and Canada will want to stick together as they have the same interests. To be kept up to date with how the NAFTA negotiations unfold, contact your account manager.
To finish the week Canada are set to release their latest unemployment rate and net change in employment numbers. Unemployment is set to remain at 5.8% and Net change in Employment is set to rise to 20k from last month’s disappointing -1.1k. Throughout 2017, Canadian unemployment numbers dropped from 6.8% to 5.8%, which prompted the Bank of Canada to hike interest rates from 0.5% to 1.25% in the space of 7 months. Investors will be watching this release closely and if Unemployment continues to fall there is an argument another hike could occur sooner rather than later.
Even though the Bank of Canada’s stance has been to hike interest rates due to the positive economic data, I still believe that NAFTA negotiations have the potential to cause major fluctuations for Canadian dollar exchange rates. If Donald Trump runs out of time and decided to pull the plug I would expect the value of the Loonie to drop dramatically.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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