By Kenny Fisher
The Canadian dollar has posted slight losses in the Friday session. Currently, USD/CAD is trading at 1.2859, up 0.17% on the day. On the release front, Canada releases GDP, with the markets braced for a negligible gain of 0.1%. The US publishes UoM Consumer Sentiment, which is expected to jump to 99.4 points.
Global stock markets are seeing red on Friday, after US President Trump announced that he would be imposing stiff tariffs on steel and aluminum, in order to protect domestic producers. Under the new scheme, foreign steel will be taxed at 25% and aluminum at 10%. The response to the move was overwhelmingly negative, both abroad and in the US. China, Canada and the EU immediately denounced the move.
US auto makers and oil and gas producers also condemned the tariffs, saying they could get caught in the middle of a nasty trade war if other countries retaliate. In imposing the tariffs, Trump relied on a provision, which allows such measures for national security, but clearly, US trading partners will not quietly accept these protectionist measures.
Canadian policymakers continue to look with growing alarm at protectionist moves by the Trump administration. Negotiations on NAFTA have not shown much progress, as a seventh and final round of talks are underway in Mexico City.
As if the headache of a possible blowup of NAFTA wasn't bad enough, the Canadian government has to deal with the stiff imports that President Trump is set to apply to steel and aluminum imports. With some 80% of Canadian exports heading south to the US, Canada can ill afford a trade war with its giant neighbor. Still, the government will be under pressure to respond forcefully and stand up for its domestic steel industry.
The Bank of Canada is one of many spectators monitoring events at the Federal Reserve. With the Fed expected to raise rates up to four times in 2018, the BoC will be pressed to match rate hikes with its southern neighbor, or risk having the Canadian currency head lower. Currently, the BoC is projecting only two rate hikes in 2018.
Strong growth has propelled the BoC to raise rates three times since July, but there are some factors weighing against a rate hike before May. First, fourth quarter expansion may fall short of the BoC's forecast of 2.5%. As well, the future of NAFTA remains unclear, as negotiations between Canada, Mexico and the US have floundered. If the US decides to pull out of NAFTA, the repercussions on the Canadian economy could be significant, and the BoC will have to delay any plans to raise rates.
Friday (March 2)
- Canadian GDP. Estimate 1.0%.
- 10:00 US Revised UoM Consumer Sentiment. Estimate 99.2.
- 10:00 US Revised UoM Inflation Expectations.
*All release times are GMT.
*Key events are in bold.
USD/CAD for Friday, March 2, 2018
USD/CAD, March 2 at 7:45 EST
Open: 1.2837 High: 1.2864 Low: 1.2820 Close: 1.2858
USD/CAD was flat in the Asian session and has edged higher in European trade.
- 1.2757 is providing support.
- 1.2865 is under pressure in resistance. It could break in the North American session.
- Current range: 1.2757 to 1.2865.
Further levels in both directions:
- Below: 1.2757, 1.2630, 1.2494 and 1.2351.
- Above: 1.2865, 1.2920, 1.3014 and 1.31.
OANDA's Open Positions Ratio
USD/CAD ratio is showing strong movement towards short positions. Currently, short positions have a majority (63%), indicative of trader bias towards USD/CAD reversing directions and moving lower.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
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