The Canadian dollar has posted considerable losses in the Tuesday session. USD/CAD is trading at 1.2961, up 0.62% on the day. On the release front, Canadian Housing Starts dropped to 214 thousand, shy of the estimate of 218 thousand. The US will release JOLTS Jobs Openings and Federal Reserve Chair Jerome Powell will speak at an event in Zurich. Later in the day, US President Trump will make a major announcement, as he decides whether the US will leave the nuclear agreement with Iran. On Wednesday, the US releases PPI reports and Canada publishes Building Permits.
The NAFTA negotiations continue this week, as senior officials from Canada, the US and Mexico are meeting in Washington to try and hammer out a new trilateral trade agreement. However, progress has been slower than hoped for, and a major stumbling block remains a US demand to raise the North American content of automobiles in order to avoid tariffs. Mexico is suspicious that the US is pushing a deal that will bring manufacturing jobs from Mexico back to the US. There are serious time constraints on reaching an agreement. Mexico is holding a general election in early July, and US President Trump wants to wrap up a deal before mid-term elections in November.
The Federal Reserve’s newest regional Fed president, Thomas Barkin, delivered a major speech on Monday, and his tone was decidedly upbeat. Barkin said that the economy is “remarkably strong: above-trend growth, low unemployment, inflation at target”. Barkin added that although the labor market is strong, it is not causing pressure on wages, but low unemployment should lead to an increase in inflationary pressures. As for upcoming rate increases, Barkin was careful to remain mum on how many rate hikes he expects this year. The Fed raised rates in March by a quarter-point and continues to forecast two additional increases this year. However, some policymakers are calling for three more hikes, given the strong health of the US economy.
