Canadian dollar rises as NAFTA deadline draws near

The Canadian dollar peaks to its strongest level since May, as Nafta deadline ends midnight, Sunday.

Canadian dollar
Source: Bloomberg

In a matter of hours, US and Canadian negotiators will be forced to reach a decision, as they scramble to fit in last-minute talks to meet the Nafta deadline.

This comes after the US and Mexico came to an agreement in August, putting pressure on Canada to jump on board with the new terms. US president Donald Trump has previously threatened to leave Canada out of the agreement and change its name to United States Mexico(USM) if it did not sign.

US President Donald Trump's administration has now affirmed Canada must sign the updated North American Free Trade Agreement before Monday local time or face exclusion from the pact.

“What we’re probably going to do is call it the USMC – the United States Marine Core” Mr Trump said when asked about his stance on Nafta.

“US, Mexico, Canada, but it will probably just be USM, it’ll be United States and Mexico” Mr Trump said in a press conference on Wednesday.

The Canadian dollar has strengthened ahead of the decision, strengthening 0.5% to $1.2847, while the Mexican peso gained around 0.2%.

Some of the major issues being discussed include Canada’s diary sector, and the US wanting access to the sector without tariffs. President Trump previously criticized Canada for charging up to 300% more for US exported dairy products.

Another dispute being discussed is around auto tariffs on Canada, which Canada is seeking protection from.

However analysts predict if a Nafta deal is reached by deadline, the US would have little reason to impose auto tariffs on Canada.

The US has already put tariffs on steel and aluminium imports from Canada, increasing tensions between the countries earlier in the year.

Canada's ambassador to Washington, David MacNaughton told reporters on Sunday " We still have a couple of tough issues, so we're doing our best."

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IG Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.