The Canadian Dollar
As the midnight deadline approached reports were circulating that a NAFTA2 trilateral deal with Mexico -Canada and the US was close and with CTV news confirming a done deal, the Canadain dollar has strengthened considerably
Predictably USDCAD has moved to the 1.2800 initial target level where the street was pricing in a tentative fair value level for the Loonie post-Canada signing the agreement. So, we can assume the first wave of appreciation has been fully priced
Positions are very crowded, so we should expect a bit of profit taking as we await confirmation of the deal from both Prime Minister Trudeau and President Trump. But of course, the devil is in the details however very positive for the Canadian dollar none the less.
A couple of things that should have the Canadian Dollar Perma Bears heading for hibernation.
Last week stellar Canada GDP suggested the Bank of Canada, G-10’s second most hawkish bank next to the Fed, has room to move interest rates higher.
Oil prices are surging as traders set sights on Brent $ 85 per barrel +
But now I’m now watching LNG!!!
And here is the kicker, and something that that should not be overlooked in the NAFTA euphoria is the massive LNG infrastructure project headed for Canada as reported by Bloomberg this morning
“Royal Dutch Shell Plc and its four partners have agreed to invest in a multibillion-dollar liquefied natural gas project in western Canada — the largest new one of its kind in years that would carve out the fastest route to Asia for North American gas.” ( Bloomberg)
This deal suggests the USDCAD could quickly move to 1.2720, the next support level, given the enormity of this infrastructure spend along. This spend is huge !!!
Indeed the stars are aligning for the Loonie, and likely not too late to get in on this party !!