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By xemarketanalysis March 5, 2018 3:23 pm
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    XE Market Analysis: Trade War Concerns Hit Canadian Dollar and Mexican Peso

    OVERVIEW

    • USD lower as Trump’s trade threats concern investors.
    • The Euro is relatively stable as positive German coalition news are offset by the Italy outcome.
    • GBP rising after stronger PMI data, and PM May's comments on the Brexit transition.
    • CAD is weakening on trade concerns.

    HIGHLIGHT

    The Canadian Dollar is down almost one percentage point versus the Dollar, trading at fresh 2018 lows as Trump plans to introduce tariffs on imported steel and aluminum that weighs on the Loonie. Canada is the biggest exporter of steel to the US, and the latest round of NAFTA negotiations is set to conclude on Tuesday as President Trump ties possible tariff exemptions to a ‘new and fair NAFTA agreement’. 

    US DOLLAR

    The Dollar is generally weaker due to President Trump's tariff rhetoric that is being viewed negatively by the market, with several countries preparing retaliatory actions that are seen dampening global growth. 

    BRITISH POUND

    The Pound is higher against its G10 counterparts after data on the service sector showed activity grew at its fastest pace since May last year and new business also strengthened. Meanwhile, Theresa May said that they are close to agreeing on a transition deal with the EU, a stark contrast to last week where it appeared the two sides were further apart primarily due to the Irish border issue.

    EURO

    The Euro is relatively flat on the day, edging up from its day's lows as an inconclusive election in Italy pointed to prolonged political uncertainty. The Euro had risen to a 2-week high overnight after Germany's Social Democrats voted to re-enter a grand coalition with Angela Merkel's conservatives. This week we have the ECB meeting where we expect no policy change, but possibly will see an offer for a subtler sign. Robust growth is expected to continue, along with inflation to gradually return towards their 2% target by dropping their so-called easing bias. 

    CANADIAN DOLLAR

    The Canadian Dollar is trading at fresh 2018 lows (see highlight). This week we have the Bank of Canada rate decision where they are expected to keep rates on hold.

    AUSTRALIAN DOLLAR

    The Australian Dollar is flat on the day, near recent lows as the broader market tone remains cautious over global trade concerns. Data showed firms paid out a record amount in wages last quarter as a boom in hiring bloated their pay bill with wages and salaries in the December quarter, up 1% on the previous quarter, and 4.3% higher than a year ago. However, with a surge of 403,000 net new jobs, the data reflects more additional hiring than individual wage growth which has remained weak on a historical basis. Q4 GDP data is due this week and is expected to show the economy grew by a relatively modest 0.6% from the previous three months.

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