– Trump tariff threat weighing on Loonie.
– Expected 50 bp BoC rate cut drives Canadian dollar lower
– US dollar trading with a bid ahead of Wednesday’s CPI numbers.
USDCAD: open 1.4168, overnight range,1.4165-1.4195, close 1.4172, WTI $67.83, Gold, $2675.10
The Canadian dollar’s Monday morning rally ended abruptly thanks to the one-two punch of jumbo rate cut fears and Trump tariffs.
President Trump is feeling empowered by the reaction to his threat (promise) to levy 25% tariffs on all imported goods from Canada. He chortled as he pointed out how Justin Trudeau “flew to Mar-a-Lago within about 15 seconds after the call ended.” In his book, The Art of the Deal, Trump extolled the virtues of leverage in any negotiation, and he knows when it comes to US/Canada trade, he holds all the leverage.
He also mocked Justin in a tweet, writing: “It was a pleasure to have dinner the other night with Governor Justin Trudeau of the Great State of Canada. I look forward to seeing the Governor again soon so that we may continue our in-depth talks on Tariffs and Trade, the results of which will be truly spectacular for all! DJT.”
Trudeau said Canada would respond to unfair tariffs in a number of ways, and “we’re still looking at the right ways to respond.” Hmm, it doesn’t sound like much of a plan.
The Canadian dollar is also suffering from “Rate Cut Fever.” The surge in unemployment reported on Friday, combined with very weak economic growth, argues for a 50 bp rate cut by the BoC tomorrow. An overwhelming majority of analysts and economists agree.
EURUSD slid in a 1.0523-1.0568 range with prices weighed down by market anticipation of a 25 bp rate cut by the ECB on Thursday.
Furthermore, the ECB may adopt dovish forward guidance due to weak economic conditions across the Eurozone, according to some analysts.
GBPUSD drifted in a 1.2738-1.2766 band. Traders are uninspired due to a lack of significant economic data or catalysts. The currency also found some support from EURGBP selling ahead of the ECB’s policy meeting later this week.
USDJPY rallied from 150.90 to 151.79, coinciding with fading Bank of Japan rate hike odds this month. Higher US Treasury yields further bolstered the pair, with the 10-year yield climbing from 4.18% to 4.23%.
AUDUSD retreated to 0.6381 from 0.6443 following the Reserve Bank of Australia’s widely anticipated decision to hold rates steady at 4.35%. RBA Governor Michelle Bulloch blamed the lack of action on persistent inflation concerns. However, the tone was dovish, suggesting rate cuts in early 2025.
There are no Canadian or US economic reports today.
