– US Core PCE Index expected to rise to 2.7% from 2.6% y/y
– Canada GDP expected to have ticked higher in January.
– US dollar opens mixed-commodity currency bloc underperform.
USDCAD: open 1.4326, overnight range 1.4301-1.4333, close 1.4306, WTI 70.03, Gold 3072.97
The Canadian dollar traded negatively yesterday and extended its losses overnight as Trump’s tariff Tuesday approaches. The selling pressure resumed after Thursday’s US weekly jobless claims and GDP reports pointed to a resilient economy, despite the impending tariffs and expected retaliation.
Canada January GDP is expected to have ticked up to 0.3% m/m from 0.2% in December. The looming trade war negates the value of the data, as the risk of massive job losses and higher inflation suggest the only direction for GDP is down.
Elsewhere, traders are keeping a wary eye on today’s US PCE-Price Index report. The forecast for Core-PCE is 2.7%, compared to 2.6% last month. If so, it supports the Fed’s current “wait and see” approach. A higher result may ignite chatter about the Fed adopting a more hawkish approach.
Trump’s tariff threats and the resulting inflation worries have sparked a flight from equities. Wall Street ended the day in the red, and most Asian indices mirrored the downbeat tone—except for the ASX 200, which managed to claw out a 0.16% gain. European markets are largely under water, with the exception of the FTSE 100 and S&P 500 futures are treading water. US 10-year Treasury yields are unchanged at 4.33%, while gold (XAUUSD) climbed sits at $3079.02.
EURUSD traded in a 1.0768-1.0802 range, holding its ground despite the latest tariff tensions. European regulators are reportedly treading lightly to avoid provoking Trump, with the FT noting they plan only symbolic penalties for Apple and Meta under the EU’s Digital Markets Act. The Economic Sentiment Indicator slipped to 96.0 from 96.9, and the Employment Expectations Indicator also declined.
GBPUSD was steady in a 1.2937-1.2969 band and found some support following stronger-than-expected UK Retail Sales, which jumped 2.2% y/y in February—far outpacing the 0.5% forecast. Sterling got an additional boost from the news that the UK sidestepped a technical recession, with Q4 GDP growing 0.1%. Still, the ONS noted that real GDP per capita fell by 0.1% in Q4 and was flat for all of 2024, dampening the optimism.
USDJPY traded in a 150.36-151.21 range, slipping from its highs after Tokyo CPI data came in above expectations. Headline inflation printed at 2.9% y/y versus 2.8% expected, and core (excluding fresh food and energy) hit 2.2% against a 2.0% forecast. The surprise uptick stoked speculation about a possible rate hike.
AUDUSD traded in a 0.6281-0.6306 range and remains under pressure as traders brace for fallout from Tariff Tuesday. Concerns over how Chinese demand will be affected by escalating trade tensions are weighing heavily, given China’s status as Australia’s top trading partner. A decisive move below 0.6250 opens the door to a test of 0.6150.
Michigan Consumer Sentiment is expected unchanged at 57.9.