Morning Commentary: NAFTA 2.0

Foreign Exchange - Morning Commentary


Share this story:
Alan Rose
Alan Rose
Foreign Exchange Head Trader
The main news overnight has been a conclusion of a new and rebranded NAFTA deal struck at the eleventh hour last night. The acronym NAFTA will no longer be applied, and it will be called the U.S.-Mexico-Canada Agreement (USMCA). All three leaders from the respective countries can now sign the deal by the end of November, but it is unlikely to get voted on during this session of the U.S. Congress and will have to await Congressional approval until 2019.
What I find very interesting this morning is that the commentaries concerning this new agreement are quite diverse. The WSJ reports that significant changes were made to the old NAFTA agreement, but other commentaries refer to the changes as tweaks to the old NAFTA agreement and just a rebranding.
Regarding the foreign exchange market, the Canadian dollar and Mexican peso are both outperforming by nearly 0.75% today and are the top performers in an otherwise subdued session. Canadian interest rates are higher (greater potential for a Bank of Canada rate hike) while Mexican interest rates are lower today (less pressure to raise Mexican interest rates to protect the peso).
As with almost everything in life nowadays, politics plays a critical element. China is the largest trading partner of the U.S. but only 4 U.S. states have China as their #1 export destination. For 36 U.S. states, Canada is the top destination for exports. The potential fallout and disruptions to supply chains could have been catastrophic if no agreement could be found; this required compromise on both sides to avoid economic consequences.
  • The British pound is stronger today on the back of a stronger than expected September Manufacturing PMI rising to 53.8 against consensus estimates of 52.5. The stronger performance was led by rising new order growth and revived domestic demand.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Investment and Insurance Products:
Are Not insured by the FDIC or any other federal government agency
Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
May Lose Value
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. The Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2018 City National Bank – All Rights Reserved.
350 South Grand Avenue, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?