The USD/CAD rose 0.62 percent on Thursday. The currency pair is trading at 1.2987 after the loonie fell on the back of disappointing GDP data and Prime Minister Justin Trudeau’s comments of “no deal is better than a bad deal” on NAFTA. The Canadian PM has been optimistic about the fate of the trade agreement and now with a deal between the US and Mexico in place he said that the Canadian government is working towards reaching a deal before Friday.
The arbitrary Friday deadline might not be reached, as according to Foreign Affairs Minister Chrystia Freeland there are still a lot of specific issues to be worked out. Since Friday is not a hard deadline there is an opportunity that negotiations spill over to next week, where a deal might be reached. The review process from the US congress means that there won’t be any changes to the current NAFTA deal until the middle of 2019 at the earliest.
Canadian growth data disappointed with a flat reading. The market anticipated a 0.1 percent gain and with a final datapoint of 0, the Canadian economy accelerated 2.9 percent on a yearly basis. The miss could be taken as a cooling of economic strength, with the market now forecasting the Bank of Canada (BoC) to hold its interest rate in September. The October monetary policy meeting could bring a better scenario with the U.S. Federal Reserve September rate hike out of the way and the benefit of having more data releases.
BoC Governor Stephen Poloz has been known to surprise the market, but this time he might consider patience and issue further guidance in October where he is scheduled to follow the monetary policy decision with a press conference where he can address questions form the financial press.