– Trump comments roil FX markets
– Canada inflation expected to fall
– USD opens with small losses after wild 24 hours.
USDCAD: open 1.4436, overnight range 1.4290-1.4510, close 1.4309, WTI $75.50, Gold, $2719.55
The Canadian dollar rallied in the wake of Trump’s inaugural speech after the incoming President did not mention anything about tariffs on Canada. USDCAD plunged to 1.4263 from a pre-speech level of 1.4465. The move may have been exacerbated due to lower than usual FX liquidity due to the Martin Luther King Day holiday in the US.
Trump did not forget about Canada or Mexico. Late in the day in response to a question about tariffs, Trump said “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people across the border. I think we’ll do it Feb. 1.”
The Canadian dollar plunged on the news with USDCAD soaring to 1.4515 from 1.4290. However, the move occurred in early Asian hours and liquidity was very sparse.
Canadian inflation is expected to have fallen by 0.4% m/m in December and be unchanged at 1.9% y/y, leaving the BoC plenty of justification to cut rates by another 25 bps.
EURUSD traded in a 1.0342-1.0435 range and is near the bottom of that band in NY. Germany’s ZEW investor sentiment index fell to 10.3 from 15.7.
GBPUSD churned in a 1.2230-1.2346 range with price action driven by mixed reactions to Trump’s statements and UK employment data. The British unemployment rate rose to 4.4% from 4.3%, which was not a surprise and wage growth rose by 5.6% (previously 5.2%). The results are sure to muddy the Boe interest rate cut discussion.
USDJPY traded erratically in a 154.77-156.24 range. Gains were capped as traders expect that the BoJ will hike rates by 25 bps on Friday and combined with softer 10-year Treasury yields
AUDUSD bounced about in 0.6209-0.6289 band. Early gains spurred by Trump’s omission of tariff talk in his inauguration speech, were erased when he adjusted his stance later. The currency remains under pressure, reflecting market uncertainty around global trade policies.
