Just a little over a year since the U.S., Canada and Mexico began renegotiating the North American Free Trade Agreement, investors have little to celebrate.

On the Aug.16 anniversary of the launch of talks on what’s become known as Nafta 2.0, President Donald Trump said he was “no rush” to renegotiate the pact, and that the U.S. was more focused on Mexico rather than Canada in the talks.

“We are not at the finish line on Nafta, but we are seemingly getting closer for sure,” wrote Brad Bechtel, managing director in FX at Jefferies, adding that it was possible Trump was pushing for a deal before the midterm elections to “scoop a win for the home team.” But hopes of getting a deal before a series of purported deadlines have been disappointed again and again over the past 12 months.

The talks were initially meant to wrap up before Christmas last year. Then the next natural deadline become Mexico’s presidential election in July. And while market expectations for a deal soared in May, the Mexican vote came and passed with the election of left-wing candidate Andrés Manuel López Obrador and still nothing concrete on the Nafta front.

Now, 12 months into the ordeal, U.S. lawmakers are in the home stretch of the midterm campaign ahead of the November election. Even if a deal was reached before U.S. voters goes to the polls, it would be months before the new trade pact would be voted on by each country’s legislature. Many market participants think there won’t be a deal until after the U.S. midterms, which could keep the loonie and the peso rather rangebound.

“Having seen the negotiations drag on for so long, the story has gotten a bit dry. Nafta headlines don’t add the same volatility to the market as they did in the beginning,” Lennon Sweeting, director of institutional trading at Coinsquare Capital Markets, told MarketWatch.

Still, the long-running talks have left a mark on the currencies of the three nations.

While the U.S. dollar, measured by the ICE U.S. Dollar Index












DXY, -0.34%










 that includes Canada’s dollar but not Mexico’s peso, gained 2.7% over the past 12 months, fueled by the Federal Reserve’s tighter monetary policy, global rates differentials, accelerating U.S. economic growth and the prospect of trade wars, which weighed heavily on the dollar’s rivals. Meanwhile, the other two Nafta currencies have moved into the opposite direction.

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The Canadian dollar












USDCAD, -0.1378%










also known as the loonie, has fallen 3.8% against the greenback, while the Mexican peso












USDMXN, +0.4806%










 dropped 7.7% versus its Northern neighbor over the past year, according to FactSet. The buck last bought $1.3059 Canadian, and 19.0440 peso on Monday.

“We still think the peso is probably a little bit too optimistically priced for a lot of short-term progress in talks,” wrote Elsa Lignos, global head of FX strategy at RBC, while the loonie was largely trapped in a range from $1.28-$1.33, according to Sweeting.

Over the past months, the U.S. also hit its global trade partners with tariffs, including steel and aluminum, of which Canada is the largest exporter to the U.S. In that vein, both Canada and Mexico’s currencies remain sensitive to the overall sentiment on trade, much of which is tied to U.S.-China talks which are picking up again this week, and which have been dictating much of the risk sentiment across financial markets.

In that sense, the peso — being a popular emerging market proxy — will be sensitive to shifts in overall risk appetite, which has been hit thanks to large-scale selloffs in emerging markets. Meanwhile, the loonie’s path will be closer aligned to with Canada’s economic data, Sweeting said. Just last week, the loonie jumped after consumer prices for July beat expectations at an annualized 3%, moving to the far end of the range targeted by the Bank of Canada and stirring expectations for a fall interest rate increase.

Read: Turkey’s woes won’t trigger a full-blown crisis across emerging markets, economist says



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