Yellen Drops Strong USD Policy
Biden had promised to halt the Keystone XL permit in his campaign so it doesn't come as a big surprise and shares of the pipeline operator itself only fell 4%. So it was an overreaction to see the loonie down 40 pips early in the week and it later halved the decline.
More than the loss of export capacity, we'd argue that signals from Biden are more meaningful. Trump deeply strained relations with many allies including Canada. Repairing those is assumed to be a Biden priority but such quick action against a key Canadian project suggests that might not be the case.
One thing to watch will be where Biden decides to visit first. In-person diplomacy is on hold because of the pandemic but there's a deep symbolic value in a Presidents first visit. For generations, Presidents visited Canada first but George W Bush broke that streak with a visit to Mexico. Trump's first stop was Saudi Arabia and that signaled a shift to a pro-Saudi, anti-Iran stance.
All of Mexico, Saudi Arabia and Iran will be waiting for early signals on what Biden's trade priorities will be.Of course, the largest trading relationship in the world is the US and China and that's the critical question for global growth in his term. Politically, it would be impossible to undo all of Trump's moves but China will surely offer an olive branch. Ultimately, it will be the most-difficult dance of his Presidency and a tough one to predict.
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