Canadian PM Carney has announced that Ottawa wants to finalize a trade deal with the US that helps Canadians. He emphasized that Canada is willing to take the necessary time to reach an agreement if possible. Carney acknowledged the challenges involved when asked about finalizing a deal before August 1. He also mentioned that preparations are underway to assist workers in the steel and softwood lumber industries dealing with tariffs.

Implied Volatility And Option Strategies

His comments have created a lot of uncertainty about the timeline for a new trade agreement, indicating ongoing volatility. Recently, the implied volatility for the USD/CAD pair, which measures expected price changes, has risen over 7%. We believe this trend will continue, making option strategies that capitalize on price movement, like straddles, more attractive than betting on a specific direction. The official’s uncertainty about meeting a deadline hints at a longer negotiation period, which could negatively affect Canadian assets. During the tense trade talks of 2017-2018, the Canadian dollar saw sharp fluctuations of over 1.5% in a single day based only on news updates. We advise clients with investments in the S&P/TSX 60 index to consider buying put options as protection against possible losses if discussions don’t go well.

Impact On Industrial Sectors

Carney’s mention of support for industrial workers highlights companies in those sectors. With the U.S. imposing around 8% duties on Canadian softwood lumber, any news will directly affect these companies. This makes derivatives related to firms like West Fraser Timber and Canfor Corporation important for targeted trades. The complexities mentioned indicate high stakes, with over $2.5 billion in goods and services crossing the border every day. We see any delays past summer as a negative factor for the Canadian dollar, potentially pushing the USD/CAD exchange rate towards the 1.38 level we saw earlier this year. This perspective favors holding long positions in USD/CAD futures or call options. Create your live VT Markets account and start trading now.

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