– Trump lacky says tariffs will go ahead but the rate may change.
– Trump opens another probe into Canadian lumber imports
– US dollar starts the month on the defensive.
USDCAD: open 1.4428, overnight range 1.4422-1.4453, close 1.4466, WTI 69.72 Gold 2872.00
The Canadian dollar is consolidating Friday’s losses ahead of Trump’s planned tariffs which are slated to be imposed tomorrow. Traders are hoping that they may be lower than the previously announced 25%. US Commerce Secretary Howard Lutnik opened the door to lower tariffs after saying Canada and Mexico had made great progress on reducing fentanyl imports into America. However, he really didn’t have a clue as he also said, “Exactly what they are, we’re going to leave that for the president and his team to negotiate.”
Friday’s headline Canada GDP rose 2.6% in Q4 2024, well above the 1.9% forecast. However, the number masks the underlying weakness GDP per capita, the measure of productivity fell for the second year in a row. Even worse in the last decade, Canada’s economy grew a mere 1.9% while south of the border the US economy soared 14.7%. Those numbers underscore how disadvantaged Canada is in a trade war.
The U.S. ISM Manufacturing PMI data is due today, kicking off a week of employment reports leading up to Friday’s highly anticipated nonfarm payrolls release. While these figures typically offer insight into Federal Reserve policy direction, Trump’s global trade war agenda complicates the central bank’s decision-making.
EURUSD traded in a 1.0389-1.0445 range, recovering Friday’s losses as hopes grew that Ukraine and the U.S., with EU support, might ease tensions, while Trump softens his tariff stance on Canada and Mexico. A de-escalation would reduce trade risks for the EU. Meanwhile, Eurozone inflation slowed to 2.4% y/y in February from January’s 2.5%, matching forecasts and reinforcing the broader disinflationary trend.
GBPUSD traded in a 1.2582-1.2649 range, gaining as broad U.S. dollar weakness lifted the currency pair. UK Manufacturing PMI came in at 46.9 for February, slightly up from January’s 46.4, but the data had little impact since it confirmed the sector remains in contraction territory.
USDJPY traded in a 149.95-151.02 range, advancing despite overall dollar softness, as comments from BoJ Governor Kazuo Ueda helped underpin the currency pair. He warned that Trump’s tariff policies and the risk of a global economic slowdown require extra caution in setting monetary policy. His remarks dampened enthusiasm for negative USDJPY trades, offering support.
AUDUSD traded in a 0.6209-0.6231 range, supported by improved risk sentiment and stronger-than-expected Australian and Chinese PMI data, which helped lift demand for risk assets.
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