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CAD slightly higher on possible NAFTA concessions

07:08 29 August 2018
Summary:
  • Canadian dollar trades somewhat higher this morning on further NAFTA-related news

  • Lira under pressure after Moody’s cut rating of 20 financial institutions

  • UK and EU are likely to drop October deadline for Brexit deal

This has been dominated by NAFTA talks and Wednesday is a continuation of this story. Yesterday we wrote about a preliminary accord struck between the US and Mexico but we also underlined that Canada needs to be on board to allow to ratify the free trade agreement. Today it seems that some progress has been made as Canada is reportedly ready to make concessions to the Trump administration on the country’s dairy market in exchange for compromises on other areas. Among these ‘other areas’ there are a key NAFTA dispute-settlement system, safeguarding of cultural industries (protection TV and radio from US competitors) as well as avoiding tougher pharmaceutical patent protections. Note that Canada is to be ready to scrap one role which blocked US farmers from exporting ultrafiltered milk to Canada. In addition to that, US farmers are to be offered a percentage of the Canadian dairy market. As a consequence the Canadian dollar is trading subtly higher this morning being the sole major currency gaining against the US dollar, these rises are not substantial though.

In line with our previous analyses the USDCAD has finally moved lower after being unable to break above its medium-term trend line. It looks that the first level bears could aim for is localized nearby 1.2750. Source: xStation5

Looking beyond the G10 block one may identify that the Turkish lira is again sliding against the US dollar this morning. These falls came after Moody’s downgraded 20 Turkish financial institutions saying there were signs of a substantial increase in risk of a downside scenario. The report also said that Turkey’s operating environment had deteriorated beyond previous expectations. Keep in mind that European banks hold a sizeable exposure on Turkey with Spanish banks accounting for more than 35% of total foreign bank claims. After the amazing lira’s slide some companies might find it hard or even impossible to pay back their obligations being denominated in foreign currencies - primarily in US dollars. The TRY is declining 0.6% as of 6:56 am BST.

The last piece of morning news concerns Brexit and (apparently) never-ending negotiations. According to people familiar with the British and European officials and cited by Bloomberg the UK and the European Union are to aim to finalize divorce terms by the middle of November at the latest. Do note that the EU summit beginning 18 October had been previously indicated as the deadline. The British pound is slightly offered in the morning as another postponement of the date when divorce terms are to be agreed on increases odds that the UK will crash out of the EU without any agreement.

The EURGBP has already moved to the important resistance in form of the upper bound of the ascending channel. Do expect that some profit-taking could take place but without the tangible progress on Brexit negotiations it appears that the GBP will keep on struggling. Source: xStation5

This content has been created by X-Trade Brokers Dom Maklerski S.A. This service is provided by X-Trade Brokers Dom Maklerski S.A. (X-Trade Brokers Brokerage House joint-stock company), with its registered office in Warsaw, at Ogrodowa 58, 00-876 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. X-Trade Brokers Dom Maklerski S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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