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Canadian Dollar Touches Three-Month High on US Trade Deal Hopes

August 28, 2018 at 15:40 by Andrew Moran

Some Canadian dollar billsThe Canadian dollar is nearing its best level in three months as investors are hopeful that a new trade deal can be reached with the US and Mexico. After President Donald Trump and his administration announced a new trade pact with Mexico, the White House confirmed it will now concentrate its efforts on Canada, hopefully coming to a trilateral arrangement before the midterm elections in November.

On Monday, the US and Mexico reached a deal that will last 16 years and require a review every six years. Some of the highlights of the agreement will include the elimination of caps on imports Mexican light vehicles, a certain amount of North American steel and aluminum consumption, the strengthening of intellectual property, and greater purchases of US agriculture.

The deal will be sent to congress for approval. It needs to be given the OK in 90 days.

US Treasury Secretary Steven Mnuchin said that he thinks Washington can reach a trade deal with Ottawa this week. Canadian Foreign Affairs Minister Chrystia Freeland is traveling to Washington to continue negotiations – her office said Canada will only sign a pact that benefits the country.

Canada sends 75% of its exports to the US, so its economy will receive a boost if a trilateral deal is made.

President Trump said that his trade representatives are willing to negotiate, but only if Canada is fair. If not, then, the president said, Canada can expect more tariffs, particularly on automobiles.

We’re starting negotiations with Canada, pretty much immediately. If they’d like to negotiate fairly, we’ll do that.

The easiest thing we can do is to tariff their cars coming in … It could end in one day and we take in a lot of money the following day.

Bank of Canada (BOC) Governor Stephen Poloz uttered optimistic remarks during last week’s Jackson Hole retreat, stating that a new trade pact will likely be met based on recent developments.

The loonie’s gains were capped by falling energy prices as October West Texas Intermediate (WTI) crude oil futures slipped 0.11, or 0.16%, to $68.81 per barrel on the New York Mercantile Exchange.

The USD/CAD currency pair tumbled 0.42% to 1.2912, from an opening of 1.2969, at 15:21 GMT on Tuesday. The CAD/MXN rose 1.01% to 14.624, from an opening of 14.473.

If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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