With not much on the data front, most eyes were on the US yesterday evening. Attention was on the North American Free Trade Agreement (NAFTA) trade deal. President Trump has already delivered a draft notice to Congress on renegotiations. A formal letter will start a 90-day consultation period with Congress. How it will all play out is now unknown and could be a source of tremendous volatility in Canadian Dollar in the months to come. In addition, changing the rules will be disruptive for many industries, along with the uncertainty it brings. Volatility for the CAD is on the way, although it briefly weakened against the US Dollar. It rebounded after the White House said that Trump will not terminate the existing trade deal immediately. The White House said that there were "pleasant and productive" conversations with leaders of Mexico and Canada. And Trump agreed not to terminate NAFTA at this time, as the leaders agreed to "proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries. Against Sterling, it had only strengthened throughout the day, but it has now come off a bit.
President Trump also released his tax plan yesterday afternoon. It was only a one page document, really, with just a few bullet points on it. Most notably, it states that he plans to reduce US corporate tax from one of the world’s highest (35%) to one of the world’s lowest – at 15%, to introduce a territorial tax system to level the playing field for US companies, tax on trillions of dollars held overseas by US companies and eliminate tax breaks for special interests. The lack of detail is seen as a bit of a disappointment . The US Dollar was down a bit on the back of the announcement , obviously it would be good for the US Dollar if these tax changes were passed, but there are questions about how likely it will be to pass; and the fact these plans were already priced in. The markets were arguably looking for something more drastic.
In the UK, Prime Minister May is said to have had productive talks with European Commission President Jean-Claude Juncker yesterday. EU leaders will meet this Saturday to work on their own negotiation plan and official talks will start after UK election on 8th June. European Chief Negotiator, Barnier, noted that the negotiations must be concluded within 18 months, to allow time for approval by respective parliaments.
Most of the attention today will be on the European Central Bank (ECB) rate decision. Although an actual rate move is still far off, some people believe there will be language changes from the central bank in June, which will signal the start of the ECB being less dovish. Traders will be looking for any clues about this possible change in language. Realistically, either way, this will probably have little effect, with the French election still taking centre stage. Looking at the data today, we await German Inflation, US Durable Goods and Unemployment figures.
I spent four years in
college. I didn’t learn
a thing. It was really
my own fault. I had
a double degree in psychology