As the negative sentiment surrounding the Canadian Dollar continued over the weekend, USD/CAD yesterday morning hit a high of 1.3125; its highest level since late June. GBP/CAD hit 1.83; its best level since the EU referendum 20 months ago although both AUD/CAD and NZD/CAD slipped a little from their recent 9-month highs. By the middle of the New York afternoon, however, USD/CAD had fallen around three quarters of a cent, though this was more a reflection of a poor session for the US Dollar than any new-found enthusiasm for its northern neighbour. The pair still shows no sign yet of returning below the psychological 1.30 barrier.
In its latest report on Canada, credit ratings agency Moody’s warns that while the end of NAFTA would be worse for Canada than for the US, the impact on Canada's overall economy would be "marginal" - although there would be winners and losers in terms of different industries and regions of each country. It identified New Brunswick and Ontario as having the highest exposure in terms of trade with NAFTA partners based on their output and export mix and said that of all the provinces, New Brunswick's exports to the US account for the largest share of its gross domestic product — nearly 30 per cent overall — with "significant exposure to higher-risk" food, agricultural commodities and forestry sectors. Meantime, Ontario exports more to the U.S. than any other province, largely because of its significant exposure to the manufacturing industry, including the auto sector. Despite these concerns, Prime Minister Justin Trudeau sounded quite upbeat on Monday: “We’re renegotiating NAFTA, we’ve seen from the President he’s enthusiastic about getting to a deal,” he said during a panel discussion, adding that Canada was continuing to work on resolving the trade talks.
It is reported by Bloomberg that, “the Trump administration is pressing countries to ally with the U.S. in pushing back against Chinese trade policies in exchange for relief from American tariffs on steel and aluminum which take effect this Friday. US Trade Representative Robert Lighthizer has laid out five conditions that countries must address before being excluded. They are: Limiting steel and aluminum exports to the U.S. to 2017 levels; actively addressing China’s various trade-distorting policies; being more assertive and cooperative with the U.S. at the G-20 Global Steel Forum; cooperating with the U.S. in launching cases against Chinese practices at the WTO; and enhancing security cooperation with the U.S” Although Canada has already been granted exemption from the steel tariffs, there are fears that this exemption could be revoked unless it takes the US side in disputes with third countries. The Canadian Dollar opens in Europe this morning with USD/CAD in the high-1.30’s and GBP/CAD in the mid-1.83’s.