USD/CAD is trading sideways in the Friday session. Currently, the pair is trading at 1.2426, up 0.07% on the day. On the release front, there are two key releases on the schedule. Canada will release Manufacturing Sales, which are expected to rebound with a strong gain of 1.9%. The US publishes UoM Consumer Sentiment, with an estimate of 97.0 points.
As was widely expected, the Bank of Canada pressed the rate trigger on Wednesday, raising interest rates by 25 basis points, from 1.00% to 1.25%. However, traders hoping for a stronger loonie were disappointed, as dovish comments from BoC Governor Stephen Poloz kept the currency from making headway against the US dollar. Poloz noted his concerns over NAFTA, the three-way free trade agreement which is crucial to the Canadian economy. US President Trump has threatened to cancel the pact unless Mexico and Canada make major concessions to the US. If the agreement is terminated, the Canadian dollar would likely take a tumble. Another round of negotiations is slated to be held in Montreal next week, and a lack of progress could weigh on the Canadian dollar.
Capitol Hill is in the headlines on Friday, as a Federal government shutdown will take effect at midnight Friday, if Congress does not vote on a short-term spending bill. The House of Representatives passed such a bill on Thursday, but Republicans face a tougher battle in the Senate. A 60-seat majority is needed for the measure to pass, which means that the Republicans, who have a 51-49 majority, will need substantial support from the Democrats. However, many Democrat lawmakers are incensed over President Trump’s threat to deport young illegal immigrants and his recent inflammatory language against immigrants from poor countries. A government shutdown last occurred in 2013, and resulted in temporary layoffs for 800,000 non-essential Federal workers. With an election year in 2018, lawmakers from both parties will not want to anger voters, so we could see a last minute compromise which prevents a shutdown. However, if the shutdown takes place, risk appetite could dampen, and that could mean minor currencies like the Canadian dollar could be under pressure.
