Above: U.S. Trade Representative Jamieson Greer speaks in Geneva. Image: Pound Sterling Live.
U.S. trade risks are pinging on the Canadian dollar's radar.
The Canadian dollar is vulnerable to creeping trade uncertainty following warnings from the senior U.S. trade envoy of the specific difficulties facing Canada-U.S. negotiations.
Jameson Greer, the U.S. Trade Representative, said that Canada is in a "different spot" to Mexico when it comes to tariffs, pointing out that only Canada and China have retaliated against U.S. tariffs, and that it's "hard to see where that ends".
The comments were made as the U.S. delegation arrived in Mexico for trade talks that will lead to a renegotiated USMCA trilateral trade agreement.
As per the USMCA implementation act, Greer is required to inform the U.S. Congress on precise recommendations for the July 1st Sunset Clause review on June 1st.
For foreign exchange markets, the deadlines bring into focus the trade risks facing the CAD and MXN, although the latest developments suggest it's CAD that faces the greater headwinds.
"Short CAD positions have been pared back but bears retain the upper hand as oil prices retreat and US Trade Representative Greer ruffled a few feathers on trade, warning of significant issues with Canada on USMCA," says a morning strategy note from Société Générale.
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Currency strategists at CIBC Capital Markets in Toronto say CAD has fallen against USD in 17 of the past 20 sessions, in part because of "trade uncertainty as USMCA negotiations approach."
That weakness is also evident on the crosses, with GBP/CAD rising to 1.8567 from May lows at 1.8319.
Of late, upside momentum in the exchange rate has improved, having reclaimed both its 21-day and 200-day moving averages, leaving it looking biased toward another test of major resistance at 1.8700.
Sterling has steadily recovered from the March selloff and the formation of higher lows through May suggests buyers are regaining confidence.
1.8700 remains a formidable ceiling that has repeatedly capped rallies over the past year, meaning another rejection cannot be ruled out.
A clean break above that level would materially improve the technical outlook and open the door toward 1.89 and potentially 1.90 in the weeks ahead.
Any marked deterioration in U.S.-Canada trade relations would offer the pair the chance to retest those higher levels.
