Skip to main content

Briefing highlights

  • Canadian tariff exemption buoys loonie
  • Currency at about 77.5 cents
  • Markets at a glance
  • Sarestsky retires as WestJet chief
  • ECB drops pledge to increase bond buys
  • Canada housing starts, building permits rise

Walk softly, carry a big stick

The Canadian dollar is holding its own today on signs of a "softer Trump" on the trade front.

Having said that, it's back to where it was before its dip.

So far, the loonie has traded in a range of 77.2 to 77.7 US cents, sitting at about 77.6 US cents by late afternoon.

To recap, the currency had been hovering at around the 77.5-cent mark as investors watched for whether President Donald Trump would exempt Canada from his planned tariffs of 25 per cent on steel imports and 10 per cent on aluminum. He's expected to take action as early as this afternoon.

Also on their radar was Wednesday's rate decision from the Bank of Canada, whose statement drove the loonie below 77 US cents as it cited trade and some broader economic concerns.

After that, though, Trump trade adviser Peter Navarro said in a televised interview that the immediate measures would exempt Canada and Mexico while the North American free-trade agreement is renegotiated. Sarah Sanders, Mr. Trump's press secretary, also told reporters that "there are potential carve-outs for Mexico and Canada based on national security, and possibly other countries, as well."

Neither Mr. Navarro nor Ms. Sanders stated the obvious: Canada is now being held hostage until NAFTA is done or dies.

Which brings us to this morning, and easing fears of a global trade war.

"Yesterday was yet another day of choppy trading as investors continued to react to developments in the Trump steel tariff story," said Jasper Lawler, heading of research at London Capital Group.

"The Dow recovered after opening some 300 points lower, as investors were rattled by the resignation of Trump's economic adviser, Gary Cohn, a calming influence on the President and a fierce opponent to Trump's tariffs," he added in a report titled "A softer Trump picks Wall Street off its lows and lifts European futures."

At this point, European markets are mixed, and New York futures are up.

"Suggestions that Mexico and Canada and potentially other countries, on a case-by-case basis, may be excluded from Trump's trade tariff was a nod to congressional Republicans and administration officials who feared that the tariffs could hurt allies rather than the intended target, China," Mr. Lawler said.

But markets should, and no doubt will, be on guard for what happens next.

"It is still hard to avoid the sense that markets are underestimating the prospect that this could all blow up into one big mess, particularly since the departure of Mr. Cohn would appear to suggest that he was losing the argument on trade policy, and that steel and aluminum tariffs are merely the warm-up act for additional policy measures," said CMC Markets analyst Michael Hewson.

Remember, Wednesday's government report showed the U.S. trade deficit at its widest in about nine years, while today's numbers from Beijing put Chinese exports up by almost 45 per cent last month, which Mr. Hewson noted was the best showing in more than two years.

"Rather than show that the global economy appears to be in fairly good health, they are likely to be used as further evidence by President Trump's trade hawks that his current policy is appropriate," Mr. Hewson added.

What we'll watch for next is whether Canada and Mexico are, in fact, exempt.

"What has come out … is confirmation that Canada and Mexico will initially be exempt (as long as NAFTA negotiations are pending) and there may be room to exempt other allies," said Elsa Lignos, Royal Bank of Canada's global head of foreign exchange strategy in London.

"Both CAD and MXN reacted well to the news, now top performers overnight alongside NZD," she added, referring to Mexico's peso and the Canadian and New Zealand dollars by their symbols.

Here are four other things to watch for, according to Ms. Lignos.

1. Whether other allies will also be spared, "which would be market-positive as it waters down the impact of tariffs further."

2. How other countries respond: "Overnight, China's Foreign Minister Wang said 'in the event of a trade war, China will make a justified and necessary response.' They are the strong comments yet, but we expect China will try to avoid escalating the situation, preferring instead to calibrate its response to closely match the direct impact to China. Given Chinese steel/aluminium exports to the U.S. are relatively low, that would mean small measures for now."

3. Who replaces Mr. Cohn: "Clearly a pro-trade choice will be risk-positive and vice versa."

4. What measures the administration takes in April after a U.S. probe of China's trade practices.

Read more

Markets at a glance

Read more

Sarestsky retires from WestJet

Gregg Saretsky is retiring as WestJet Airlines Ltd.'s chief executive officer - today - to be succeeded by Ed Sims.

"Having found his successor, he has agreed with the company that his retirement will be effective immediately," the airline said in a statement as it named Mr. Sims, executive vice-president of commercial, to the top job.

Mr. Sims has been at WestJet for less than a year, having joined the airline last May, before which he was chief of New Zealand's Airways.

Mr. Saretsky had been CEO for eight years.

Read more

More news

Streetwise

Insight

Inside the Market

In case you missed it