Canadian Dollar Drops on Trade War Fears, Falling Crude Oil

The Canadian dollar fell against its major rivals on Tuesday amid concerns about trade wars between the United States and their allies, Canada being one of them. The drop of crude oil added to the currency’s woes.

The Canadian economy heavily depends on trade with the USA, therefore it is very important for Canada to preserve the North American Free Trade Agreement. Yet it looks like the NAFTA negotiations between the US, Canada, and Mexico are far from any meaningful result. Moreover, US President Donald Trump voiced desire to make two separate agreements — one with Canada and one with Mexico:

I wouldn’t mind seeing NAFTA where you go by a different name, where you make a separate deal with Canada and a separate deal with Mexico. Because you’re talking about a very different two countries.

White House economic advisor Larry Kudlow confirmed such intentions today, saying:

Yesterday we met with the president a couple times and he is very seriously contemplating kind of a shift in NAFTA negotiations. His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately. I think the important thought here is he may be moving quickly towards these bilateral discussions.

Falling price for crude oil also weighed on the loonie. There was uncertainty whether the Organization of Petroleum Exporting Countries and its allies will preserve oil production cuts that allowed prices to recover from extremely low levels. There were speculations that Saudi Arabia and Russia are going to increase their output.

USD/CAD rose from 1.2931 to 1.2968 as of 21:38 GMT today, though retreated from the daily high of 1.3067. EUR/CAD rallied from 1.5120 to 1.5195. CAD/JPY slid from 84.94 to 84.64, touching the daily low of 84.06.

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