- EUR CAD Flat over NAFTA Worries – Trump remains committed to renegotiating trade agreement.
- German Consumer Confidence Improves – Helps Euro stem losses.
- Drop in Oil Pressures Canadian Dollar – US crude inventory continues to grow.
- French Consumer Climate Report Ahead – May allow single currency to claw back losses.
The Euro Canadian Dollar (EUR CAD) exchange rate stabilised overnight on Wednesday as Donald Trump’s plans to renegotiate the North American Free Trade Agreement (NAFTA) cut the ‘Loonie’s recent gains.
Euro Canadian Dollar (EUR CAD) Trends Flatly as Trade Agreement under Threat
The Canadian Dollar was unable to trend higher against the Euro late on Wednesday as investors’ concerns that Canada’s economy could be negatively impacted by Trump’s plan to renegotiate NAFTA grew.
The new President has been a vocal critic against free trade agreements, blaming them for the downfall of US industries by causing companies to struggle to compete against cheaper foreign products.
While most of Trump’s ire over NAFTA seems directed at Mexico, there are worries that Canada could get caught in the crossfire as his administration strikes an increasingly protectionist stance against free trade.
However, despite his bold claims, it is still unclear how much damage Trump could actually to the NAFTA agreement as Canadian and American trade lawyer Mark Warner explained;
‘Some of his statements sound threatening, but we need to see how much is bluster, what Congress can do to stop him and what courts can do to stop him.’
Trump may also face pressure from a bill introduced by Republican senator Mike Lee, which would require all US trade decisions to gain approval from congress should it pass.
German Consumer Confidence Cuts EUR Losses
The Euro finally found some respite this week as Gfk reported a rise in Germany’s Consumer Climate earlier this morning.
Figures showed that confidence rose from 9.9 to 10.2 in February, outpacing forecasts that the measure would only rise to 10.0 and reaching its highest levels since September.
The report pointed to high employment, rising incomes and low interest rates as key contributors to the rise, but warned that the uncertainty of the new US administration and the possible disruption of a number of European elections in the face of rising populism could cause confidence to drop later in the year.
‘Loonie’ Gains Cut by Drop in Oil Prices
The Canadian Dollar’s advance was also rebuffed yesterday by a slight drop in oil prices as US Crude stocks rose for the third consecutive week.
Crude prices have fallen 0.82% since the release of US inventory figures on Wednesday as the US reported that its surplus surged from 2.34m to 2.84m barrels, slightly outpacing predictions that it would rise to 2.81m.
This follows a report from BP that oil prices are unlikely to reach $100 a barrel again as the rise of renewable energy and the recent discovery of 2.5trn barrel of extractable oil is likely to cause supply to greatly outweigh demand for the foreseeable future.
EUR CAD Exchange Rate Forecast: French Consumer Confidence Ahead
The EUR CAD exchange rate may rally tomorrow following the release of the latest consumer confidence report from France as analysts expect the gauge to rise from 99 to 100 in January.
Meanwhile, Canada’s budget deficit is expected to narrow on Friday – possibly leading to a strengthening of the Canadian Dollar if it drops from $1.5bn in November.
Current Interbank Exchange Rates
At the time of writing the EUR CAD exchange rate was trending around 1.39 and the CAD EUR exchange rate was trending around 0.71.