How much could CAD rise if there's no bad news this week
It's looking increasingly likely that the US won't pull the plug on NAFTA talks this week. Reports of progress today are plentiful despite some key sticking points.
That should be enough to get the US to commit to another round in Mexico in late February. Expect a statement at some point (likely late) on Monday.
If so and if there's an optimistic bent, how much could the Canadian dollar rally? (or USD/CAD fall).
First, let's have a look at how major currencies have performed year-to date:
The big story this year has been USD weakness but the loonie is struggling as well. With commodity prices ripping, the BOC hikingand risk appetite roaring, how do we square the underperformance?
It's all about NAFTA.
The market is worried about a negative headline and continue uncertainty (I was worried too).
Given that, I'd weigh that most of the gap between fellow commodity FX cousins AUD and NZD this year is fear of a Trump NAFTA tweet.
That would make for a quick 2% rally if that worry was erased.
So could we see USD/CAD down 2% on Monday? It's highly unlikely.
The best we might get is a commitment to more talks. That's a stay-of-execution not a release from prison.
Still, it merits a sigh of relief and USD/CAD falling 120 pips in the aftermath is possible, if not likely.
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