The Canadian dollar has rebounded on Wednesday, after three straight winning sessions. In the North American session, USD/CAD is trading at 1.2819, down 0.45% on the day. On the release front, Canadian Manufacturing Production dropped to 1.4%, but still beat the estimate of 1.1%. In the US, construction numbers were mixed. Building Permits remained steady at 1.35 million, matching the forecast. Housing Starts dropped to 1.29 million, short of the estimate of 1.32 million.

In the U.S, retail sales reports were shy of the estimates in April, but investors preferred to focus on the positive, noting that both retail sales and core retail sales posted gains, as consumer spending is improving after a sluggish first quarter. A new concern is higher gas prices, which could put a dent in consumers’ wallets and hurt spending. Oil prices have hit their highest levels in over 3 years, and with the US leaving the Iran nuclear deal and escalating tensions in the Middle East, gasoline prices could remain at high levels.

The Trump administration is offering Canada a carrot (or is it more of a stick?) in the NAFTA negotiations. At the end of April, Trump gave both Canada and Mexico another 30-day exemption on steel and aluminum tariffs, lasting until June 1. Earlier in the week, U.S Commerce Secretary Wilbur Ross said that further extensions could be granted, depending on the progress made in the NAFTA talks. Ottawa has demanded “full and permanent” exemptions from the tariffs, but may have to cough up more concessions in the NAFTA talks in order to convince Washington to exempt Canadian steel and aluminum imports from tariffs.

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