CAD edges marginally lower - Scotiabank

The Canadian Dollar (CAD) is marginally weaker. Canada got a further, temporary concession from the US border tariff regime yesterday, with the White House announcing a one-month reprieve for the auto sector, Scotiabank's Chief FX Strategist Shaun Osborne notes, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Tariff concessions provide no support

"That followed a meeting between the president and US automakers at the White House where it seems quite likely that the Big Three spelled out what 25% tariffs wo0uld do to the auto sector--and the broader US economy. Very roughly, assuming a 0% tariff on Canadian autos/parts exports to the US for the next month, 10% for energy and 25% on everything else, the effective tariff regime Canada is facing - for now - looks to be around 14%. Weighted by export share, it's perhaps more like 17%."

"That tariff rate may change as steel & aluminum tariffs and reciprocal tariffs are added while--hopefully--border tariffs are removed on in the next few weeks but if we assume (as I have) that the CAD's recent losses reflected the anticipation of a tariff regime in the 10-15% range, there may be very little, if any, significant benefit for the CAD from the auto concessions. Canada reports trade data at 8.30ET." 

"Spot is tracking a little higher on the day so far. Short-term technical patterns lean USD-bearish after the USD's sharp fall Tuesday and spot's push under support at 1.4370 yesterday (now near-by resistance). The push under support may auger for additional losses towards 1.4200/50 but there is not a lot of appetite to push the USD significantly lower. Momentum signals are mixed, suggesting that any move down is likely to be choppy and uneven. A push back through the upper 1.43s may see the USD regain 1.4425/50."