The Canadian dollar rally is impressive but not enormous
The Canadian dollar is the top performer today, climbing almost 1% against the US dollar and more against a few other currencies.
But looking at the leaderboard, it's not that impressive. The loonie has modestly outperformed NZD and AUD, which suggests the NAFTA move is only about half the move.
To me, that's not nearly enough to reflect the news that Trump wants to announce a NAFTA deal in less than two weeks.
The Canadian dollar is still the worst performer in G10 FX this year. Just to get back to unchanged, it would need to rally 1.8%. I'd argue it would probably need to rally another 2% to get back to where it should be.
A bit part of the trepidation is that no deal has been announced yet and just today Trump was tweeting about NAFTA. I don't blame anyone for skepticism about a White House where nothing is final until the ink is dry.
Ultimately, I think there is a good case for a return to 1.25 but expect a few twists and turns along the way.
