Canadian Dollar Hits Two-Week High on NAFTA Talks, Offsets Bad Data

The Canadian dollar is trading at its best level in two weeks against its US counterpart on Thursday. The loonie is rallying on reports that progress is being made in North American Free Trade Agreement (NAFTA) negotiations. This news, which is bullish for the Canadian economy, allowed the loonie to dismiss lower energy prices and recent negative economic data.
Mexican officials confirmed that an agreement with the US could be reached soon, leaving many analysts hopeful that all three nations could successfully renegotiate the 25-year-old trade pact. With the US midterm elections just months away, the White House and Republicans may want to conclude the deliberations as quickly as possible.
NAFTA is critical for the Canadian economy since it ships roughly 75% of its goods to the US. American and Canadian officials have hit a rough patch over the last several months, especially when Prime Minister Justin Trudeau disagreed with a sunset clause that would require NAFTA to be renegotiated ever five years. There are also reports that top trade adviser, Robert Lighthizer, dislikes Foreign Affairs Minister Chrystia Freeland, something that experts suggest may have delayed talks.
All three parties have expressed optimism that NAFTA can be renegotiated successfully by October at the latest.
Meanwhile, the loonie’s gains were capped by falling energy prices as October West Texas Intermediate (WTI) crude oil futures shed $0.39, or 0.57%, to $67.48 per barrel. Oil is one of Canada’s biggest exports.
On the economic front, Canadian wholesale trade tumbled 0.8% in June, the second drop in three months, and overall retail sales slipped 0.2% to $50.7 billion in June.
Investors will now look ahead to next week’s second-quarter gross domestic product (GDP) numbers. This will be a key factor for the Bank of Canada (BOC) to move forward with an increase to interest rates in September, something the market widely anticipates.
The USD/CAD currency pair advanced 0.5% to 1.3066, from an opening of 1.2998, at 13:34 GMT on Thursday. The EUR/CAD rose 0.23% to 1.5107, from an opening of 1.5071.

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