TRADE WAR?
There are several ways to interpret the implementation of the 20% tax on softwood lumber:
-The tone of the U.S. administration has changed since the Trump/Trudeau meeting: Negative for the CAD
-Other industries could be targeted (dairy, etc.): Negative for the CAD
-Renegotiating NAFTA is about to start: Negative for the CAD
-Nothing new, we knew it was coming: Positive/neutral for the CAD
-Markets expected a 30% tax, stocks for big names in the industry are rising: Positive/neutral for the CAD
-The government will step in to help out the industry: Positive for the CAD
Markets must have gone through all these phases of analysis, as the initial drop in the CAD was partially reversed late in the day and we did not see a closing above the high marks for 2017.
Another theme influencing the USD/CAD pair is the health of the Canadian economy; will positive readings over the past 3 months be confirmed by Retail Sales? We’ll find out at 8:30 this morning.
