This was the week: Is NAFTA slipping away from Canada + Fed hike
US President Donald Trump continued criticizing Canada on its trade practices. More importantly, the US deadline for reaching a NAFTA deal with Canada is about to expire and they intend to move forward with a bilateral agreement with Mexico, excluding Canada. The goal is to ratify the deal before Lopez-Obrador becomes Mexico’s President on December 1st and before the current term of the US Congress ends.
The US still plans to draft the text in a manner that will allow Canada to join later. Nevertheless, the American announcements weighed on the Canadian Dollar.
Canada’s GDP rose by 0.2% MoM in July after remaining flat in June. The small beat reversed the trend and pushed the C$ higher.
The Raw Materials Price Index (RMPI) plunged by 4.6%.Bank of Canada Governor Stephen Poloz reiterated the Bank’s stance to raise rates at a gradual pace. He also expressed optimism about NAFTA but said that Canada’s reliance on the US has recently dropped.
The US Federal Reserve raised interest rates as expected and also maintained the projections for four more hikes until the end of 2019. The FOMC Statement did not include the words “accommodative policy” and this weighed on the greenback initially. However, Fed Chair Jerome Powell stressed that the Fed’s policy has not changed and the US Dollar advanced.
Canadian events: Jobs report high on the agenda
Markit’s manufacturing PMI on Monday and the Richard Ivey’s Purchasing Managers’ Index on Thursday may have some impact on the loonie, but the primary event is only on Friday. Canada reported a considerable loss of jobs in August: no less than 51.4K. A bounce is likely now. The Unemployment Rate rose to 6%, concerning some watchers and it is now projected to drop back down.
