Canada’s international trade minister wants to start talks with Chinese officials to address trade issues. The recent decision to bring back the Indian high commissioner is a key step toward promoting dialogue and enhancing trade relations. There is shared interest in discussing trade opportunities with Mercosur. At the same time, there is growing enthusiasm to speed up trade talks with ASEAN countries.

Expected Strength of the Canadian Dollar

Given these diplomatic efforts, we think traders should prepare for the Canadian dollar to strengthen in the next few weeks. The loonie has been trading at multi-month lows against the US dollar, making it sensitive to any positive developments in trade relations. We recommend considering an upward position in CAD futures or call options. The push to resolve issues with Chinese counterparts is especially important for our commodity markets. In 2022, two-way merchandise trade was worth nearly $129 billion, so any progress could significantly benefit major Canadian resource exporters. This suggests considering bullish positions on companies that export lumber, canola, and potash. Ng’s comments about India indicate a potential shift following the pause in negotiations for a trade deal last year due to political tensions. The return of the high commissioner lowers geopolitical risks for Canadian assets. Although bilateral trade is smaller—about $12 billion per year—renewing talks could bring long-term advantages for sectors discussed in earlier free trade negotiations.

Prospects with ASEAN and Mercosur

We see finalizing an agreement with ASEAN countries as an immediate growth opportunity. With trade already reaching $40.7 billion in 2023, a formal deal with this quickly growing group of over 660 million people could greatly benefit Canadian technology and financial service companies. Traders should look for companies that could gain from these new market opportunities. Lastly, it’s important to keep an eye on the potential talks with Mercosur and how they might affect agricultural derivatives. Historically, these discussions have faced delays over issues related to beef and sugar market access from the South American bloc. As a result, this could lead to significant volatility for Canadian agricultural producers and related futures contracts. Create your live VT Markets account and start trading now.

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