– Trump suggests he will go ahead with Canada tariffs.
– Risk aversion rises on chaotic White House messaging.
– USD giving back some of overnight gains in early NY trading.
USDCAD: open 1.4268, overnight range 1.4240-1.4280, close 1.4261, WTI 70.65, Gold 2937.63
The Canadian dollar was Trumped yesterday, and it is licking its wounds this morning. President Trump does not appear to be swayed or impressed with Canadian delegations lobbying state governors and other policymakers for an exemption to Trump’s tariffs slated to be imposed March 4. Yesterday, Mr. Trump said, “We are on time with the tariffs, and it seems like that is moving along very rapidly. We have been treated very badly, and it is not just Canada and Mexico. We have been taken advantage of.”
Trump appears to have abandoned Ukraine. He is demanding Ukraine give the US 50% of all Ukraine’s critical minerals, including lithium and uranium, while forcing Ukraine to let Russia keep the territory it is occupying. Meanwhile, European leaders are appalled at Trump’s actions, and France is even considering deploying nuclear-armed aircraft to Ukraine as a deterrent.
EURUSD drifted within a narrow 1.0457-1.0480 range overnight, with the focus shifting away from German election concerns and back to the contrasting policy stances of the ECB and the Fed. Comments from ECB policymaker Martin Kazaks, who reiterated his support for rate cuts, weighed on the pair. Meanwhile, German Q4 GDP contracted by 0.2% as forecasted.
GBPUSD traded in a 1.2606-1.2639 range. Prices were on the defensive following yesterday’s BoE policymaker Swati Dhingra’s renewed call for aggressive rate cuts. She reiterated that a slower reduction would hinder economic growth. Later today, BoE Chief Economist Huw Pill is expected to push back against her position, emphasizing concerns over persistent inflation. With limited US data ahead of month-end, range trading is likely to persist.
USDJPY dipsy-doodled in a 149.20-150.30 band, initially rallying in Asia before reversing course. Expectations for higher Japanese rates and increasing risk aversion weighed on the currency pair.
AUDUSD traded defensively in a 0.6326-0.6357 range due to negative risk sentiment. Australian CPI data is on tap tomorrow and expected at 2.6% y/y in January compared to 2.5% previously.
US consumer confidence is forecast to decline to 102.5 from 104.1.
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