The Canadian dollar is showing little movement in the Tuesday session. Currently, USD/CAD is trading at 1.3042, up 0.05% on the day. On the release front, Canada releases its monthly GDP report, which is expected to rise to 0.3%. Canadian Raw Materials Price Index is forecast to drop to 2.7%. The U.S will release consumer inflation and spending reports. As well, CB Consumer Confidence is expected to tick up to 126.5 points. On Wednesday, the Federal Reserve will release a rate statement.
The U.S economy continues to hum in the second quarter. Advance GDP for Q2, the first of three GDP reports, posted a sparkling gain of 4.1%, just shy of the forecast of 4.2%. This was much stronger than the gain of 2.2% in Q1 and marked the strongest quarter of economic growth since 2014. President Trump took credit for the strong GDP report and claimed that “these numbers are very, very sustainable”. However, analysts are being more cautious in their forecasts, calling for growth in the third quarter of around 2.5 percent.
Negotiations over NAFTA have progressed slowly, but policymakers in Canada and Mexico are hopeful that the flexibility that the U.S has shown towards the European Union will extend to NAFTA as well. Last week, President Trump met with EU Commission President Jean-Claude Juckner and announced that the U.S would hold off any further tariffs while the sides were negotiating. Will this goodwill extend to NAFTA as well? The U.S has insisted on far-reaching changes to the pact, including its renegotiation in five years and higher U.S content in automobiles produced in North America. If its demands aren’t met, the Trump administration has said it could pursue separate free trade agreements with Canada and Mexico. However, the latter two countries would like to maintain a trilateral arrangement. If the parties are able to reach a new agreement, the Canadian dollar would likely move higher.
