Canadian Dollar Update, May 26, 2021 – Canadian Dollar Sinks on US Trade Tensions
USD/CAD Open: 1.2073-77, Overnight Range: 1.2046-1.2080, Previous Close: 1.2064
WTI Oil is at $66.23 and gold is at $1,904.30. US markets are higher today.
For today, USD resistance is at 1.2144. Support is at 1.2078.
The Canadian dollar underperformed against its G-10 peers overnight due to renewed trade tensions between the US and Canada.
The Trump administration tore up the North American Free Trade Agreement (NAFTA) in 2018 and replaced it with the US Mexico Canada Agreement (USMCA) on trade. All parties ratified the deal by March 2020. It appears the Americans are still not happy.
On May 21, the Americans announced they were raising tariffs on imports of Canadian lumber from 9.0% to 18.0%. The Americans believe Canadian foresters receive unfair government subsidies as most harvested lumber comes from crown owned land.
The Americans upped the trade tensions again yesterday. They are accusing Canada of denying American dairy producers’ fair access to the Canadian market. They believe that Canada’s dairy quota system denies Americans their fair share of the Canadian market.
Global investors have taken note. The Canadian dollar lost ground against the US dollar while its commodity currency cousins’ the Australian and New Zealand dollars, rallied.
The New Zealand dollar was the big mover overnight. It gained 1.7% against the US dollar after the Reserve Bank of New Zealand turned hawkish.
The RBNZ left interest rates unchanged but brought forward the timing of the next interest rate increase. They adopted a series of Overnight Cash Rate (OCR) forecasts that indicated New Zealand interest rates would start rising in 2022. They also skipped mentioning the value of the currency. NZDUSD soared to 0.7315 from 0.7224.
AUDUSD rallied as well, climbing from 0.7750-0.7795, supported by modestly better than expected economic data and broad US dollar weakness.
EURUSD, GBPUSD, and JPY traded quietly inside yesterday’s ranges, with traders awaiting fresh guidance to determine direction.
There are not any economic data reports of note today.
Today’s Suggested Range USD/CAD: 1.2050 – 1.2150