Trump and Canadian Prime Minister Carney are set to meet at 11.45 am US Eastern time on Tuesday. This meeting could impact trade relations between the US and Canada.

Lutnick provided an earlier preview regarding the potential trade deal with Canada. He noted that while a deal is possible, it involves complex issues.

Tuesday Morning Meeting

The meeting scheduled for Tuesday morning in Washington, between Trump and Carney, comes at a time when trade discussions carry meaningful consequences. It’s set against a backdrop of uncertainty around tariffs and bilateral agreements, particularly around resource exports and rules of origin. Traders have been watching closely for hints of steel and lumber policy implications, given prior friction in those areas. In the hours following the announcement, futures markets showed only muted movements, a reflection of hesitation rather than consensus.

Lutnick, in comments delivered earlier this week, talked through some of the challenges facing negotiators. He highlighted detailed regulatory matters still unresolved. These include content thresholds in manufactured goods, tariff schedules, and dispute resolution channels—none easily addressed without concessions. From his perspective, any arrangement to come out of the talks would likely need to pass through a longer bureaucratic process, not just a handshake.

Looking back at similar talks historically, we’ve often seen currency volatility increase in the two days prior and following this kind of summit. The risk here doesn’t lie in bold declarations, but rather in the detail—or absence—of the final joint statement. We generally anticipate short-dated option premiums to stay inflated into next week, particularly in USD/CAD. Skew bias has already moved slightly in favour of Canadian dollar strength, suggesting at least some expectation of a more cooperative tone.

Monitoring Market Reactions

We’d also be mindful of directional risk in interest rate swaps tied to North American economic activity. Cross-border capital flow expectations could adjust quickly, especially if production quotas get included in any framework. Some traders have already added optionality to hedge sharp moves, especially around energy-linked equities and transport.

From a positioning standpoint, it might be worth weighing calendar spreads over outright directional bets for now. Watching where the volume builds in post-announcement trading could offer better guidance than pre-emptive rebalancing. Timing is key—snap reactions often reverse once market dialogue turns to text interpretation and implementation estimates.

As we head toward the Tuesday meeting, attention shifts to trade-sensitive sectors and any forward-looking language in prepared remarks. Equities tied to export-driven industries could see the most shifts. How the fixed income space reacts will depend largely on references to cross-border regulatory harmonisation, or lack thereof.

At this stage, caution isn’t the same as inaction. The numbers are holding stable, but the potential for re-rating is there.

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