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Loonie Dips on NAFTA Concerns; Euro Strengthens on ECB Guidance

Published January 11, 2018
  • The Canadian dollar extended losses this morning following yesterday’s report that Canada is increasingly convinced the US is to withdraw from NAFTA, though the White House states that Trump’s position remains unchanged. NAFTA concerns have caused market participants to revisit the likelihood of a January rate increase by the Bank of Canada.
  • The markets are anxiously awaiting next week’s Bank of Canada rate decision, with the odds of an increase now being priced in at ~75% – 80%, down from closer to 90% before NAFTA concerns hit headlines.
  • US Treasuries have recovered somewhat (causing yields to drop) after China’s State Administration of Foreign Exchange said that yesterday’s announcement that China could be planning to stop its purchases of US debt may have cited “wrong sources” or be “fake news”.
  • The euro is strong this morning after the release of the European Central Bank’s December minutes, which mentioned that forward guidance on future policy could be revisited in early 2018, raising hopes of a rate increase in the early part of this year.
  • Oil prices are mixed to start the session (WTI is up, Brent is down) after yesterday’s reports of a larger than expected decline in crude inventories, as well as a slight decline in production (down ~3%). WTI Crude is up 0.39% to $63.82 with Brent Crude down 0.16% to $69.09 at the time of writing.