The Canadian Dollar topped our one-day performance table for a second consecutive day on Wednesday and yesterday came very close to making it three from three. During the European morning, USD/CAD dropped to a low around 1.2835 – its lowest level in more than a week – before clawing its way back on to 1.29 late in the New York afternoon. GBP/CAD fell two-tenths whilst AUD/CAD fell six-tenths of a point to 0.9955; its lowest level in almost three weeks.
During testimony to the Senate Finance Committee, US Trade Representative Robert Lighthizer confirmed a list of countries which will be exempt from tariffs on steel and aluminium: Canada, Mexico, EU, Brazil, Australia, Argentina and South Korea. Lighthizer told senators that Trump agreed, “based on a certain set of criteria, there are some countries with whom we're negotiating and the question becomes the obvious one that you think, as a matter of business, how does this work? So what he has decided to do is to pause the imposition of the tariffs with respect to those countries."
The global impact of the steel and aluminium tariffs is now only 30% of the original announcement. The exemptions for Canada were already known so the direct impact was minimal but, to the extent that it might indicate a willingness on the part of President Trump to continue to negotiate and do deals, there was a mild sense of relief for the Canadian Dollar.
In her speech at the University of Toronto’s Rotman School of Management, Bank of Canada Senior Deputy Governor Carolyn Wilkins said that while much has been accomplished to make the financial system more resilient, the job is not done. “We have accomplished much over the past decade, and we are now reaping the benefits… They might not be durable, though, unless we focus on some unfinished business: refining our understanding of the role of monetary policy in supporting financial stability, keeping regulatory and supervisory policies current as risks evolve, and planning for recovery and resolution when things go wrong.” As for the immediate pressures on monetary policy, we may get more of a clue later today when CPI inflation data for February is published. Consensus expectations are for annual CPI to rise from 1.7% to 2.0%. The Canadian Dollar opens in Asia this morning at USD/CAD1.2920, AUD/CAD0.9960 and NZD/CAD0.9330.