From the FXWW Chatroom: UsdCad ended Toronto at 1.3244 but edged higher towards Asia open. Some people linked the weak Cad to story that Trump administration considering ramping up lumber duties as high as 30.88% from 20% about 2 months ago. This dispute is nothing new, it has been largest and most enduring since 1982. Lumber accounts for 1.3% of Canadian real GDP, biggest trade surplus in relation to forestry. But US is heavily dependent on Canadian lumber. The needs of the country outweigh the domestic supply. We think this is minor and should not affect the market too much.
On the other hand, we see weak opening in oil and copper futures, which could partly add pressure on the Loonie. Corporate bids located under 1.3220 while sellers atop 1.3300. There is a $500mio worth of FX options strike 1.3250 maturing today.
From our strategist Patrick Bennett: This escalation or rekindling (pun intended) of trade spats, this one US/Canada on lumber is not welcome by markets, even if this particular issue is not new. There has been a feeling that the hard line on trade had softened slightly. But even still, NAFTA is still being talked about. More important for Cad at present is a clear pickup in activity that is bullish for the currency.