(30 AUGUST 2018)DAILY MARKET BRIEF 2:Loonie at mercy of NAFTA deal

As Canada scrambles to reach closure on the North American Free Trade Agreement, CAN is wobbling. It gained (USD/CAD: -0.77% week-to-date), but now the trend is reversing. USD/CAD is bouncing off 1.2907 (29 August low) and expected to hit 1.3010.

NAFTA talks are in progress with a deadline set for Friday by the US: a very tight goal. Canadian Prime Minister Trudeau says closure is feasible – we’ll see. Canada is ready to make concessions on auto content. Other topics include Canadian protective tariffs on agricultural products such as dairy, poultry, eggs and wine, broadening of trilateral dispute settlement topics and US tariffs on aluminium and steel. Either the negotiation will have to be extended, or the deal will be settled hurriedly. The latter could lead to no deal in the end, which could cause massive investment outflow. The US-Mexico deal looks easier to achieve than the US-Canada one.

By Vincent Mivelaz