NAFTA Headache Hurts Canadian Dollar
The Canadian dollar has a headache. It’s not a migraine; it is a stress headache triggered by the ongoing NAFTA negotiations. President Trump campaigned on ‘tearing up NAFTA and he is in the process of fulfilling that promise under the guise of renegotiation.
It is evident that the American negotiating tactic is to make outrageous demands, knowing that they will be rejected and thus let the Americans walk away from the table, complaining that they can’t get a deal done.
That evidence became clearer on the weekend. The American’s are demanding 85 percent North American content in all automobiles with 50 percent of that content from the USA. And, they plan on changing the content calculation formula to one that favours the Americans.
The NAFTA news didn’t get much attention in overnight markets, but that wasn’t the case in early New York trading. USDCAD rallied from an overnight low of 1.2472 to 1.2543.
The Canadian dollar could see some vulnerability from the Bank of Canada Business Outlook Survey which is released today. It will garner a little more attention than usual because Governor Poloz cited developments in the June 30 report for supporting interest rate increases. The US is demanding 50% content in auto’s which could be the death blow to NAFTA.EURUSD inched lower due to a right wing election victory in Austria, bearish technicals and Spanish politics.
The Spain/Catalan dispute is ongoing. Prime Minister Rajoy issued a Monday deadline for the Catalan Leader Carles Puigdemont to say Independence or No Independence. Puigdemont was a dialogue, and Rajoy wants him to shut-up.
Sterling was whippy inside a tight range ahead of a slew of economic reports later in the week.
Oil prices were the big mover overnight. Iraqui forces are clashing with Kurdish forces near the Kirkuk oil field. WTI rose from Friday’s $51.35/b closing rate to $52.21 in Europe.
FX Ranges for major currency pairs