The Canadian dollar has ticked lower in the Thursday session. Currently, USD/CAD is trading at 1.3214, up 0.27% on the day. On the release front, Canadian Building Permits jumped 1.1%, crushing the estimate of -0.1%. In the U.S, unemployment claims dropped to 203 thousand, beating the estimate of 214 thousand. However, ADP Nonfarm Payrolls disappointed with a reading of 163 thousand. This was well below the forecast of 195 thousand. In the services sector, ISM Non-Manufacturing PMI climbed to 58.5, above the estimate of 56.8 points. On Friday, the focus will be on employment indicators on both sides of the border. Canada releases Employment Change, while the U.S will release three key employment indicators – nonfarm payrolls, wage growth and the unemployment rate.
There were no surprises as the Bank of Canada stayed on the sidelines and maintained the benchmark rate at 1.50%. The Bank raised rates by a quarter-point in July, and has hiked rates four times since last summer. The Bank stated in its rate announcement that policymakers would be “monitoring closely the course of the NAFTA negotiations and other trade policy developments, and their impact on the inflation outlook”. With the Canadian economy performing well and the Fed likely raising rates later this month, there is pressure on the BoC to again raise rates in 2018. However, concerns over NAFTA and global trade tensions have won the day for now, as the BoC took a pass on a rate hike.
The Canadian dollar continues to struggle, having lost 2.2% since August 30. Concerns over the NAFTA talks are weighing heavily on the Canadian dollar. Canada and the U.S have already exchanged tariffs on each other’s products, and Canadian and U.S negotiators are trying to hammer out a trade deal, after a deadline last Friday was missed. In order to reach a new trade agreement with the U.S, Canada will likely have to make some concessions, such as reducing hefty tariffs which protect the Canadian dairy industry. Prime Minister Justin Trudeau has said that no deal is better than a bad deal, but it’s clear that Canada can ill-afford to remain the odd man out, with some 75% of Canadian exports destined for the U.S.
