Canadian Dollar Lower Despite Trump Giving NAFTA A Shot

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Includes: FXC
by: Alfonso Esparza

The Canadian dollar was lower on Thursday when it touched daily and weekly lows after the Trump administration retracted on comments it was working on an executive order to pull out of NAFTA. Trump said that after talking to the president and prime minister of Mexico and Canada, he decided to give the renegotiation route a shot. The US dollar is still rising after a lukewarm reception of the Trump tax reform outline and the hope that the government avoiding a shutdown.

There were no economic releases in Canada, and the US had a mixed session with the core durable goods miss to be the most relevant, as it could signal an economic slowdown that could be verified on Friday when the US releases the GDP for the first quarter. The market consensus already is pricing in a slowdown, but being the first estimate, there can still be surprises for investors.

The oil supply disruption ended in Libya, as the two key oilfields are back on-line, putting pressure on the price of crude. The Organization of the Petroleum Exporting Countries (OPEC) production cut agreement stabilized prices, but the rise in shale production still puts supply ahead of demand. The extension on the deal is expected to happen in May, but it all hinges on Russia, which agreed to it last time, but it will take some persuasion from Saudi Arabia for the nation to commit a second time.

The USD/CAD gained 0.1 percent in the last 24 hours. The pair is trading at 1.3671 after the Trump administration walked back its comments about tearing up the NAFTA treaty. The loonie has recovered from daily lows of 1.3671 but is still trading near those levels, which are also weekly lows for the loonie.

The Toronto Stock Market (TSX) was hit as the Home Capital Group (OTCPK:HMCBF) saga continues. The alternative lender has been in trouble for the past two years, but as housing concerns keep pointing to a bubble in prices, the trouble for the company could be signalling an end to rising prices. The firm has approached banks in an apparent attempt at a sale as its stock price has plunged by 60 percent following the news it had secured a $2 billion line of credit after there was a $591 million drop in high interest saving accounts in the past month.

The USD/MXN lost 0.888 percent on Thursday. The pair is trading at 19.0211 after the Trump administration said it will the NAFTA treaty a good strong shot before pulling the plug completely. This is a reversal from Wednesday's rumblings of an executive order being drafted to terminate US involvement in the deal. Trump says he reached that decision after calls with the Mexican president and the Canadian prime minister. The peso gained after plans to renegotiate NAFTA replaced the idea of tearing it down outright. There is still the legal question whether Trump could unilaterally end the deal, as it was implemented through legislation. The fact that the trade agreement has winners and losers in all three nations means it could prove unpopular in some US states which could lose direct investment.

Market events to watch this week:

Friday, April 28
4:30am GBP Prelim GDP q/q
8:30am CAD GDP m/m
8:30am USD Advance GDP q/q

*All times EDT