NY Open: Sentiment soars on US-Mexico deal

NY Open: Sentiment soars on US-Mexico deal

Forex
MO
Michael O’Neill

FX Trader, Loonieviews.net

Global markets are basking in the glow from yesterday’s US/Mexico trade announcement. President Trump describes it as a trade deal while the Office of the United States Trade Representative calls it “a preliminary agreement in principle.”  Wall Street called it an excuse to buy stocks, and they did with the three major equity indices closing sharply higher. They added to the gains this morning, albeit marginally, with some believing that if the US and Mexico can come to terms, so can the US and China. 

The improved tone to risk sentiment is understandable and perhaps continued US dollar weakness is justified. However, it is not so obvious for Canada or the Canadian dollar. USDCAD dropped from 1.3066 yesterday, prior to the trade announcement, to 1.2890 this morning. The move may be due to the belief that for Canada, any deal is better than no deal.

That sentiment flies in the face of the Canadian government's assertion that it would walk away rather than sign a bad deal. Trump’s threat to impose 25% tariffs on car imports to spur Canada’s capitulation to the US/Mexico trade agreement terms may handcuff Canadian negotiators. The US plans on beginning the process to get the deal approved by Congress on Friday, which doesn’t give Canadian negotiators a lot of time. 

If the US/Mexico deal was good for America and good for Mexico, by default it can’t be good for Canada.
 
Nevertheless, as a rising tide floats all boats, a sinking dollar lifts all currencies, the Canadian dollar included. USDCAD has dropped steadily this morning, coinciding with a broad US dollar retreat versus the majors. Traders have ignored the slightly weaker than expected US Case Shiller Housing index, a widening of the US trade gap, a firmer Richmond Fed Manufacturing Index, and higher Consumer Confidence.

USDCAD (daily)
USDCAD (daily, source: Saxo Bank)

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.