Canadian Dollar Gaps Up, Yen Drops as US Shelves Mexico Tariffs
CANADIAN DOLLAR, TRUMP, TARIFFS, MEXICO - TALKING POINTS:
- Canadian Dollar gaps higher as Trump shelves Mexico tariffs
- Anti-risk Japanese Yen, Swiss Franc down as sentiment firms
- US CPI, Eurozone FinMin summit probably in focus from here
The Canadian Dollar gapped higher (USDCAD lower) at the start of the trading week as markets responded to reports that the US has reached an agreement with Mexico late Friday that will indefinitely delay planned tariff hikes due to have taken effect this week. President Donald Trump threatened to levy Mexican imports to compel the country to do more about stopping illegal immigration into the US.
This is supportive for the Canadian unit because de-escalation of tensions between the US and Mexico increases the probability that the nascent USMCA – the free trade pact negotiated between the three North American countries to replace NAFTA – will pass through to implementation. The news was supportive for broader sentiment as well, with the anti-risk Japanese Yen and Swiss Franc tracking lower.
The Canadian economic data docket is all but through the remainder of the trading week, leaving the currency at the mercy of external cross-currents. US CPI data and its implications for Fed policy expectations, as well as a meeting of Eurozone finance ministers to decide on the penalties facing Italy for breaching budgetary limits, may command outsized attention.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.