Canadian dollar hinges on NAFTA deal

Financial and commodity markets analytics

The Canadian dollar has taken a dive in today’s trading session as doubts surfaced over a proposed North American Free Trade Agreement (NAFTA) between The US, Canada and Mexico.

Going by reports, it seems that a deal between The US and Mexico is on the cards but a deal with Canada remains elusive which is in stark contrast to reports out last week that a deal with Canada was looking like the most likely scenario.

The Canadian dollar has been climbing in recent weeks against the major currencies on the back of a proposed NAFTA deal, as well as a recent rate hike delivered by the Bank of Canada which was expected to also lift rates again in September.

Some analysts predict a fall of up to 20 percent if US President Donald Trump decides to walk away from the deal

“We expect Trump to remain motivated by his campaign promises and continue his protectionist rhetoric and threat tactics,” says Brittany Baumann, a macro strategist at TD Securities.

“We cannot entirely rule out the event of termination, bearing in mind Trump's motivation to treat trade deals like Humpty Dumpty - a break-it-then-fix-it strategy - along with his desire for bilateral deals over multilateralism. The combination of stringent US proposals, a lengthening timeline of talks, and President Trump’s persistent threats of termination and campaign motives have raised the risk that Trump triggers Article 2205, setting off a six-month notice of termination,” she added.


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