USD/CAD off highs, back around 1.2830

Global Stock Markets

USD/CAD focused on US data, Yellen

The pair is up for the fifth session in a row today, trading just below fresh 4-week tops in the 1.2860 region recorded earlier in the session. Furthermore, spot has gained around 2 big figures since November’s low in the 1.2665/60 band.

The bearish note around crude oil prices keeps weighing on the Canadian Dollar so far today, with the barrel of West Texas Intermediate retreating to fresh lows in the mid-$57.00s although recovering some ground soon afterwards.

As usual, US-CA yield spread differentials continue to rule the sentiment around the pair, with spreads of the 2-year reference navigating multi-month tops for the time being.

Later in the NA session, Chair J.Yellen will testify before the Joint Economic Committee of Congress on the US economic outlook. In addition, NY Fed W.Dudley (permanent voter, centrist) and San Francisco Fed J.Williams (2018 voter, centrist) are also scheduled to speak, while the second revision of the US Q3 GDP will be the salient event seconded by October’s pending home sales and the Fed’s Beige Book.

USD/CAD significant levels
As of writing the pair is gaining 0.04% at 1.2823 facing the initial hurdle at 1.2849 (high Nov.28) seconded by 1.2918 (high Oct.27) and finally 1.2927 (50% Fibo of the 2017 drop). On the other hand, a breach of 1.2765 (10-day sma) would open the door to 1.2671 (low Nov.24) and then 1.2601 (55-day sma).

U.S. to partially unveil key NAFTA proposal, talks seen dragging

U.S. trade negotiators will only partially unveil new text on modifying a key chapter on investment under NAFTA, two well-placed sources said on Sunday, underlying the cautious pace of talks that are supposed to wrap up by the end of the year. 

The sources, with knowledge of the effort to modernize the trilateral North American Free Trade Agreement (NAFTA), said the proposal on investment would not elaborate on possible changes being weighed by Washington under Chapter 11 of NAFTA. 

U.S. officials, speaking on condition of anonymity, said the administration was still consulting with stakeholders, including business, on the issue. 

Trade experts say the sluggish tempo of the talks mean it is doubtful whether Canada, Mexico and the United States -- meeting in Ottawa for the third of seven planned rounds -- can come to a deal by the end of December. 

Chief Canadian negotiator Steve Verheul said he did not expect the U.S. side to present detailed proposals in Ottawa on major issues such as dispute settlement, the dairy sector and tougher rules for North American content on autos.

Verheul told reporters the talks were constructive, although they had occasionally “become a little more heated”. He said had seen no sign so far that the U.S. delegation might be preparing to leave the talks. 

NAFTA underpins more than $1 trillion in trade between the three countries a year, accounting for 39 percent of Canada’s GDP and 40 percent of Mexico‘s, but just 5 percent in the case of the United States, the world’s largest economy. 

NAFTA’s Chapter 11 allows an investor from a member country to sue a member government on the basis that it was not treated fairly. 

Canada is proposing a similar arrangement to the one it has in its free trade deal with the European Union, a senior Canadian source said. Canada and the EU have agreed to set up a permanent investment court to settle disputes. 

U.S. Trade Representative Robert Lighthizer told a U.S. Senate committee he was “troubled” by Chapter 11 but pushed back at suggestions that it should be abolished. 

The sources said that when the U.S. team unveiled its proposal later in the round, it would focus on eliminating barriers to investment in all sectors in the NAFTA countries, but not weigh into possible changes to Chapter 11.

U.S. push for freer NAFTA e-commerce meets growing resistance

A U.S. proposal for Mexico and Canada to vastly raise the value of online purchases that can be imported duty-free from stores like Amazon.com (AMZN.O) and eBay (EBAY.O) is emerging as a flashpoint in an upcoming renegotiation of the NAFTA trade deal.

Vulnerable industries like footwear, textiles and bricks and mortar retail in Mexico and Canada are pushing back hard against the proposal by the U.S. trade representative to raise Mexican and Canadian duty-free import limits for e-commerce to the U.S. level of $800, from current thresholds of $50 and C$20, respectively. 

For the Mexicans, the main worry is that such a move could open a back door for cheap imports from Asia and beyond. For Canadian retailers, the fear is that e-commerce companies will undercut their prices. 

The U.S. plan was unveiled in July as part of the Trump administration's goals to renegotiate the 25-year-old treaty. 

While Mexico and Canada are still formulating their responses, Mexico City is leaning strongly against the proposal in its current form, and Ottawa may not be far behind. 

The proposed $800 level "opens a completely unnecessary door" to imports from outside the NAFTA trading bloc, Mexican Economy Minister Ildefonso Guajardo said on Thursday on the sidelines of a NAFTA-related event, calling it "a very sensitive topic." 

The growing controversy over how to account for a burgeoning regional e-commerce sector dominated by the United States highlights a rare area where the Trump administration is pushing to liberalize trade rules rather than tightening them. 

Much of Trump’s criticism of NAFTA stems from his belief it has decimated U.S. manufacturing as companies shifted production to Mexican factories with cheaper labor, creating a U.S. trade deficit with Mexico worth more than $60 billion.

U.S. Chamber of Commerce chief expects basic NAFTA deal by mid-2018

The United States, Mexico and Canada are likely to reach a basic accord over reworking the North American Free Trade Agreement (NAFTA) by the middle of next year, the head of the biggest U.S. business lobby group said on Sunday.

The future of the deal binding the three nations has been in doubt since Donald Trump won the U.S. presidency in November pledging to ditch it if he could not rework terms in favor of the United States, clouding the outlook for Mexico in particular.

However, Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, said that he believed business leaders and policymakers were increasingly aware of the need to get a new deal and move on without disrupting business.

Trump contends that Mexico's growth as a manufacturing power since NAFTA took effect in 1994 has cost jobs in the United States. However, defenders of the deal say it has benefited all three nations and helped American firms compete globally.

The U.S. government has yet to send a letter telling Congress that it intends to launch NAFTA negotiations in 90 days - the notification period required under the fast-track process - so the potential start of talks is now drifting into August.

Donohue said that step should follow in the next few weeks, adding neither Trump nor U.S. firms had an interest in dragging out the NAFTA talks because of the economic damage it would do.

During his own campaign, Trump threatened to slap hefty tariffs on Mexican-made goods, including a 35 percent tax on cars, and he caused dismay in Mexico with a pledge to build a southern border wall to keep out illegal immigrants.

Since taking office, Trump's tone has softened, though he again railed against NAFTA over the past week and returned to the issue of the wall, saying Mexico would pay for it "eventually."

Nevertheless, Donohue said understanding was growing over the need for a deal that would accelerate, not reduce trade, and argued the prospect of punitive tariffs was receding.