The Canadian dollar is trading sideways in the Wednesday session. Currently, USD/CAD is trading at 1.2877, down 0.11% on the day. On the release front, there are no Canadian indicators for a third straight day. In the US, Final GDP is expected to be revised upwards to 2.7%, after the initial reading of 2.5% back in February. US Pending Homes is forecast to rebound with a strong gain of 2.1%. On Thursday, US unemployment claims is forecast to tick up to 230 thousand, and UoM Consumer Sentiment is predicted to climb to 101.9 points. Canada will release the monthly GDP report.
The tariff dispute between the US and China has shaken up global stock markets and also caused volatility in the currency markets. The US dollar recorded losses last week, after President Trump’s dramatic announcement that he was imposing stiff tariffs on up to $60 billion in Chinese imports. China vowed to retaliate and slap imports on a range of US products. This move came on the heels of a blanket US tariff on steel imports. Although Trump backtracked and exempted Canada, Mexico and other countries from the steel tariffs, the threat of a global trading war has unnerved investors. This week, however, China was singing a more conciliatory tune, saying it would apply to the World Trade Organization to overturn the tariffs. The US has imposed the tariffs under a national security provision, but China has argued that the move is a trade barrier with the intent of protecting domestic producers. Although the dispute has not been resolved, the Chinese move has eased tensions and restored investor risk appetite, in the hope that both the US and China will climb down from their trees and reach some agreement instead of imposing tariffs on each other.
Negotiations over the NAFTA agreement continue, and positive statements from US negotiators have raised hopes that a new agreement will be reached between Canada, Mexico and the US. A key sticking point has been a US demand to increase the US content in vehicles made in NAFTA members, but the Trump administration has apparently backed down on this requirement. The gloomy air around the talks has improved, and there is cautious optimism that the sides can hammer out a new agreement in the next few weeks.