The Canadian dollar rallied against its major peers today (though failed to gain on the strong euro) after the United States and Mexico reached a preliminary trade agreement, giving hope that the similar deal can be reached with Canada.
Over the weekend, the USA and Mexico reached a preliminary deal that should replace the North American Trade Agreement. While Canada was excluded from the negotiations, the success of the talks led to hopes that the North American country will join the new trade agreement. Indeed, Enrique Peña Nieto, the outgoing Mexican President, told US President Donald Trump via a phone call:
It is our wish, Mr. President, that now Canada will also be able to be incorporated in all this. I assume that they are going to carry out negotiations of the sensitive bilateral issues between Canada and the United States.
Yet Trump was not particularly keen on the idea, saying “we’ll see if Canada can be part.”
Meanwhile, the recent comments from Stephen Poloz, Bank of Canada Governor, made analysts doubt if the central bank will raise interest rates in the immediate future. He spoke about how digitalization of the economy should change approach to monetary policy, stating:
It means following a more gradual approach to normalizing interest rates than traditional models would advocate.
USD/CAD dropped from 1.3015 to 1.2965 as of 17:19 GMT today, retreating from the daily high of 1.3067. EUR/CAD advanced from 1.5123 to 1.5153, touching the high of 1.5189 intraday. CAD/JPY was up from 85.47 to 85.64, bouncing from the daily low of 85.03.
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