Over the weekend, renewed glimmers of hope emerged from Canada regarding its relationship with the US, Commerzbank's FX analyst Michael Pfister notes.

A sustainable CAD appreciation is likely some time away

"After the US President reacted indignantly to an advertisement by the Canadian province of Ontario, increasing tariffs on Canadian imports by 10 percentage points and breaking off all talks, the Canadian Prime Minister has now apologised. At the same time, the Canadian Prime Minister has once again offered to negotiate a favourable trade deal."

"However, it does not seem that this will happen quite so quickly. Although Trump emphasised that he has a good relationship with his counterpart, he appears to be rejecting the resumption of talks for the time being. In short, further steps towards détente are likely to be necessary and a deal between the two countries is still a long way off. This is also consistent with the fact that the growth figures for August, published on Friday, once again fell short of expectations."

"Another Canadian government project, diversifying export targets, is likely to take even longer. Last week, the Canadian prime minister also met with his Chinese counterpart in an attempt to improve relations. Expectations were immediately dampened here, too; several more meetings are likely to be necessary before significant results can be achieved. For the CAD, this means that risks are likely to outweigh opportunities for the time being, and a sustainable appreciation is likely some time away."