NAFTA Renegotiation is a long term threat to CAD.
The Canadian dollar could be in for a turbulent year and I think the main cause for concern for Canadian Dollar seller is the renegotiation of North American Free Trade Agreement (NAFTA).
Donald Trump is currently very unhappy with the current agreement and feels it should be much more beneficial to the United Sates. This does not sit well with Mexico or Canada, both of which are heavily reliant on exports to the states, their primary export partner. I mentioned Trump is not happy, he has actually threatened to cancel the deal completely.
The consequences of a change in the deal should not be underestimated and could hit the Canadian Dollar severely. I would keep a very close eye on developments if I had a trade involving the Canadian Dollar.
Tomorrow will see a raft of data releases from Canada including International Merchandise Trade, Purchasing Managers Index (PMI) figures and perhaps the most significant, unemployment.
First up is International Merchandise Trade, it represents the difference in the value of its imports and exports of Canadian goods excluding intangibles such as services. It is worth keeping an eye on as Canadas GDP is made up substantially of exports, such as oil and gold. This will also be interesting to see whether the uncertainty surrounding the NAFTA situation influences import-export levels.
Following import-export figures we have unemployment data. Unemployment is a leading indicator for the Canadian economy. There is expected to be a slight rise from 5.9% to 6% from the previous month. If the figure comes in away from expectations expect volatility.
If you are a Canadian dollar seller and you have to move short to medium term it may be wise to take advantage of current levels considering Trump’s stance on NAFTA.
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