CAD drops on NAFTA concerns

Thursday, January 11, 2018

The loonie is trading lower versus most currencies today and flat versus the USD. The New Housing Price Index printed as a slight miss at 0.1% growth versus the expected 0.2%. Trade relations between Canada and the USA are tense as Canada ‘detonated a bomb’ yesterday, lodging and official complaint to the World Trade Organization on the USA’s use of punitive duties. If these trade complaints cause the USA to leave NAFTA, it would cause significant downward pressure on the loonie. Bank of Canada rate increase expectations have fallen in the wake of this developing narrative.

Economic data from the USA was a group of misses causing some weakness in the greenback. Producer price index and core producer price index both came in as -0.1% versus expectations of 0.2%, and unemployment claims were slightly higher at 261k versus expected 246k. Tomorrow’s CPI inflation data will be crucial information for the Federal Reserve and their path of interest rate increases.

The Euro is rallying after the European Central Bank released monetary policy meeting notes. The report alluded the ECB will be increasing communication with markets as to not shock them when adjusting their stimulus program later in the year. Overall monthly industrial production in the Eurozone was up 1.0% versus the expected 0.8% reinforcing the EUR strength.
Equities are green across the board this morning: the Dow is up 0.36%, the S&P 0.37%, the NASDAQ 0.28% and the TSX 0.19%. Crude Oil is strong this morning, up 1.42% ($64.47) while Gold is up 0.30% ($1,323.30).

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