Loonie soars in the wake of the new trade deal with the U.S. and Mexico

The loonie soared higher in the wake of news that Canada has reached a deal to join the United States and Mexico in a new North American trade agreement.

The loonie traded higher at 78.13 cents US compared with an average of 77.25 cents US on Friday.

While most economists have been expecting the Bank of Canada to raise its key interest rate target later this month, the trade negotiations have been a key uncertainty.

The central bank had made a point of saying it was closely watching the NAFTA talks and other trade policy developments, which could hurt the economy.

The newly christened the U.S.-Mexico-Canada Trade Agreement, or USMCA, provides increased access to Canada’s dairy market for U.S. producers.

It also appears to preserve the key dispute-resolution provisions, while a side letter published along with the main text of the agreement exempts a percentage of eligible auto exports from the tariffs.