The Canadian dollar has started the week with slight gains in the Monday session. Currently, USD/CAD is trading at 1.3062, down 0.27% on the day. It’s a quiet start to the week, with no US or Canadian releases on the schedule. On Tuesday, Canada releases Wholesale Sales.
The Canadian dollar suffered its worst week since May 2016, sliding 2.7 percent. USD/CAD pushed above the 1.31 level earlier on Monday, as the pair trades at its highest level since June. The Canadian dollar lost more ground on Friday, after Canadian Manufacturing Sales declined for the third time in four months. The key indicator declined 1.0%, missing the estimate of -0.8%. In the US, the week ended on a mixed note. Construction data disappointed, as Building Permits dropped to 1.30 million, shy of the estimate of 1.30 million. Housing Starts followed a similar trend, falling to 1.24 million and missing the forecast of 1.29 million. There was better news from consumer confidence, as UoM Consumer Sentiment improved to 102.0, beating the estimate of 99.3 points. This marked the first time that the indicator has been over the symbolic 100 level since October 2017.
Canadian policymakers continue to cast a nervous eye towards the Trump White House. The latest worry is the steel tariffs that the US has imposed, with the European Union threatening to retaliate against a host of US products. Although Canada was exempted from the tariffs, this could prove temporary, and the threat of a global trade war is not good news for Canada. Added to this mix is rising uncertainty over the NAFTA agreement. The US is demanding far-reaching concessions from Canada and Mexico, and the protectionist Trump administration could decide to exit NAFTA, which has been a key driver of economic growth for Canada. With the Federal Reserve poised to raise interest rates later this week for the first time in 2018, the fragile Canadian dollar could find itself mired in more headwinds.
