The Canadian dollar is trading higher on Thursday on higher energy prices and renewed North American Free Trade Agreement (NAFTA) negotiations between Canadian and US officials. With NAFTA talks at a standstill, the loonie has been finding support from rallying crude oil, allowing the currency to near a three-week high.
This week, officials will gather in Washington to find an agreement on a new NAFTA pact. Washington says that a deal must be completed by October 1, but Prime Minister Justin Trudeau has been adamant that he wants to see some flexibility before Ottawa commits to a new agreement.
While reports suggest that Canada is willing to miss the October 1 deadline, US and Mexican lawmakers are pressing Ottawa to stay in a trilateral pact.
Canada has a lot more to lose than the US should NAFTA talks break down. Ottawa sends roughly 75% of its exports to the US and maintains a current account deficit. This means the Canadian economy would be hurt by crumbling NAFTA deliberations and even intensifying trade disputes between the US and China.
With analysts, officials, and trade negotiators slamming the lengthy process, Foreign Affairs Minister Chrystia Freeland contends that completing a deal as complex and immense as NAFTA in 13 months is âabsolutely normal,â telling reporters:
For an agreement of this scale, 13 months for a very deep modernization of the kind weâre working on is absolutely normal. Trade agreements do take some time, both to negotiate and to update, because the economy is complicated and trade agreements are complicated.
The loonie has been given a boost from rallying energy prices as US crude recently topped $70 a barrel again. October West Texas Intermediate (WTI) crude oil futures rose $0.15, or 0.21%, to $71.27 per barrel at 13:14 GMT on Thursday on the New York Mercantile Exchange.
Year-to-date, oil has surged 21%, but crudeâs ascent has only had an impact on the Canadian dollar in recent weeks.
On the economic front, Canada and the US published several key reports. In Canada, manufacturing sales climbed 0.9%. In the US, building permits fell to 1.23 million, housing starts jumped to 1.28 million, and existing home sales lost ground for the fourth consecutive month. Investors will now look ahead to Friday when Canadaâs August inflation report, ADP nonfarm employment change, and July retail sales data are published.
The USD/CAD currency pair tumbled 0.17% to 1.2902, from an opening of 1.2922. The EUR/CAD soared 0.68% to 1.5181, from an opening of 1.5084.
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