After its very poor performance year-to-date in 2018, the Canadian Dollar had a very good week; almost managing the rare feat of topping our one-day table for three consecutive days from Tuesday to Thursday. USD/CAD began the week at 13090 ad only very marginally extended gains on Monday to a high of 1.3120 at the start of the European morning. From then on, however, it was downhill all the way to a low on Thursday just under 1.2850. The pair was then back on 1.29 as the US Dollar found some support more generally but closed the week back down around 1.2860 on stronger than expected Canadian inflation data. Having peaked at 1.0235 on March 14th, AUD/CAD moved back down through parity on Wednesday and fell below 0.9920 on Friday to finish at its lowest level in more than three weeks.
Prime Minister Justin Trudeau reiterated his belief there will be agreement on a renewed North American free trade deal between Canada, Mexico and the United States. Trudeau didn't offer any timeline when questioned about the negotiations on Wednesday, only saying he believed a deal is eminently possible. “We are there working very, very hard and moving forward on trying to get a good deal. We know that there is a good deal eminently possible for Canada, for the U.S. and for Mexican citizen and workers.” According to Bloomberg, there were indications the U.S. is willing to budge on one of its core demands as President Donald Trump pushes to get a deal ahead of looming Mexican elections. One person familiar with the talks, speaking on condition of anonymity, said the Americans are showing flexibility on a demand for a 50 percent, U.S.-specific content requirement, but it hasn’t been formally withdrawn.
Canada’s ambassador to Washington, David MacNaughton, told reporters the U.S. has made suggestions on auto rules that “were actually quite creative” and, if taken “to their logical conclusion,” would eliminate the need for the 50 percent requirement. The Globe and Mail newspaper, citing unidentified sources, reported the U.S. had altogether dropped its demand for 50 percent U.S. content in vehicles. Traders rushed to cover short positions in the Canadian Dollar on Wednesday and Thursday and on Friday the currency was given a further lift by stronger than expected inflation figures. Statistics Canada reported that CPI rose 2.2% on a year-over-year basis in February, following a 1.7% increase in January and compared to consensus expectations of a 2.0% annual rate. All eight major components increased year over year in February. The Canadian Dollar ended a good week at USD/CAD1.2835, AUD/CAD0.9925 and GBP/CAD1.8160.