Over the weekend, Canada had a new ray of hope regarding its relationship with the U.S., says Michael Pfister, FX analyst at Commerzbank.
Permanent CAD appreciation likely to take some time
“Following the US President’s angry reaction to an advertisement by the Canadian province of Ontario, which increased tariffs on Canadian imports by 10 percentage points and broke off all negotiations, the Canadian Prime Minister has now apologized. Additionally, the Canadian Prime Minister has once again offered to negotiate a favorable trade agreement.”
“However, it does not appear that this will happen so soon. Although Trump stressed that he has good relations with his counterpart, he is dismissing the resumption of talks for the time being. In short, further steps towards detente are likely to be necessary and an agreement between the two countries is still a long way off. It is also in line with the fact that August growth figures published on Friday once again fell short of expectations.”
“Another Canadian government project, diversifying export targets, is likely to take even longer. Last week, the Canadian Prime Minister also met with his Chinese counterpart in an effort to improve relations. Here too expectations were immediately tempered; several more meetings are likely to be necessary before significant results can be achieved. For the CAD, this means that the risks are likely to outweigh the opportunities for some time, and lasting appreciation is likely to take some time.”
