The Canadian dollar has posted slight gains in the Thursday session. Currently, the pair is trading at 1.2310, down 0.53% on the day. On the release front, there are two key indicators, either of which could impact on USD/CAD. Canada releases CPI,which is expected to decline 0.3%. The US will publish Advance GDP, which is forecast to post a strong gain of 3.0%.
On Thursday, both Canadian and US data was mixed, and the Canadian dollar didn’t show much movement. Canadian Core Retail Sales jumped 1.6% in November, crushing the estimate of 0.8%. This marked the strongest gain since January. Retail Sales couldn’t keep pace, as the small gain of 0.2% missed the estimate of 0.7%. In the US, unemployment claims rose to 233 thousand, but still beat the estimate of 239 thousand. Housing numbers continue to soften, as New Home Sales fell to 625 thousand, well off the estimate of 679 thousand. This follows the trend we saw earlier in the week, when Existing Home Sales slowed to 5.57 million, short of the estimate of 5.72 million.
The Canadian economy has been performing fairly well, and recent employment numbers have been much stronger than expected. However, there is a dark cloud on the horizon regarding NAFTA. The free trade agreement is critical for the Canadian economy, so threats by US President Trump to blow up the agreement are causing genuine concern for the government and the Bank of Canada. Negotiations between Canada, Mexico and the US, which are slated to end in March, have not yielded much progress, with the US side reportedly showing little flexibility. Trump has repeatedly said he is unhappy with the deal, and may prefer a new bilateral agreement between the US and Canada. At the same time, there are also many US companies that benefit from the current deal and are opposed to the US pulling the plug. If NAFTA is terminated, it’s a good bet that the Canadian dollar will take a tumble.
