The Canadian dollar has ticked higher in the Friday session. Currently, USD/CAD is trading at 1.3074, down 0.03% on the day. On the release front, there are no Canadian indicators on the schedule. The U.S will release Advance GDP for the second quarter, with the markets expecting a strong gain of 4.2%. As well, UoM Consumer Sentiment is forecast to drop to 97.1 points.
Investors remained worried about the prospect of a full-blown trade war, as the U.S and its trading partners have in engaged in a tariff battle. However, the mood last week was one of “reconciliation” rather than “retaliation”, at least between the U.S and the European Union. A meeting between EU Commission President Jean-Claude Juckner and U.S President Trump was successful, as the two leaders agreed to take concrete steps to eliminate tariffs and improve the trade relationship between the U.S and the EU, which has been battered in recent weeks. President Trump agreed to hold back on any further tariffs while talks are ongoing. This is a major concession from Trump, who just last week had threatened to impose tariffs on European car imports. The agreement with the Europeans showed some surprising flexibility on the part of Trump, and Canadian policymakers are hoping that the conciliatory U.S stance will extend to the NAFTA negotiations with Canada and Mexico. The U.S has insisted on far-reaching changes to the pact, including its renegotiation in five years. 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 do reach a new agreement, the Canadian dollar would likely move higher.
The Canadian dollar posted strong gains on Wednesday, following an Energy Information Administration (EIA) report which showed a huge decline of 6.1 million in U.S crude inventories. This is the second decline in three months, and was much higher than the estimate of 2.6 million. Growing tensions between Iran on the one hand and the U.S and Saudi Arabia on the other have also raised concerns about oil supplies, and higher crude prices have boosted the Canadian dollar.
