NAFTA OR NOT?
Bank of Canada Governor Stephen Poloz is fond of saying the Bank of Canada’s decisions depend on economic indicators. Friday’s inflation reading was in keeping with the market consensus and showed consumer prices up 1.9% on an annualized basis. This should prove reassuring for those doubting the strength of the Canadian economy.
The much anticipated speech by U.S. President Donald Trump in Davos did not hold any surprises for markets. No references were made to strong protectionist measures and nothing was said about the dollar or NAFTA.
Today is the final official day of the sixth round of NAFTA talks. We’ll be paying very close attention to the public statements.
In addition to NAFTA, the week will feature the final Federal Reserve meeting chaired by Janet Yellen on Wednesday. No key rate increase is anticipated. On Friday, U.S. job data will be released and closer to home, Canadian GDP figures for November will be made available on Wednesday.
As we near the end of January, the USD has lost more than 3% compared with the other major currencies based on the U.S. Dollar Index (DXY). Two-year U.S. bond yields have gone up by 0.26% and 10-year yields are up 0.31%. This should normally favour a stronger USD.
Olivier Cosialls
Range of the day: 1.2250 – 1.2450