Daily USD/CAD
When you see the last three big spikes on the USD/CAD chart, they tell the story. The rise to 1.48, 1.4550 and 1.4500 was accompanied by increased tariffs, duties and tariffs. They represent the height of tariff fear around the USMCA.
Subtext is something I think is important as the highs are gradually lower. The market does not believe that tariffs will continue. That's what I argued on BNN on Thursday.
I then heard some positive comments from Canadian officials. It was followed by better sounding comments from Trump about fentanyl over the weekend. Then, this morning's White House economic advisor Kevin Hassett said:
We have been negotiating flexible with Mexico and Canada. We control our borders and have made great strides in fentanyl. Both of these were very positive developments related to tariff policy.
The market has heard, but it's hard to be mercilessly excited about Trump with his tariffs and the “51st state” talk. I think Congress is giving him a bit of latitude for now on the understanding that North American tariffs will soon be much lower fees.
If so, it should be a tailwind for CAD, but at the same time, domestic headwinds are blowing. Last week's BOC investigation into business employment and CAPEX was disastrous.
Today, data from the Canadian Real Estate Association showed a decline in home sales of 9.8% m/m in February. Prices are being raised for now, but if sales don't return significantly in April/May, they will break.
