November 26, 2024
- Trump promises new tariffs on Canada, Mexico and China.
- FOMC minutes on tap-should be a non-event
- US dollar opens mixed-CAD is worst performing currency vs USD
FX at a Glance
Source: IFXA/RP
USDCAD open 1.4089, overnight range,1.3981-1.4178, close 1.3986
USDCAD skyrocketed in the early hours of Asian trading after President-elect Donald Trump said he would slap 25% tariffs on imports from Canada on day one. The tariffs will remain in place until officials clamp down on drugs and illegal migrants crossing the border.
The US-Mexico-Canada agreement on trade (USMC) is apparently under scrutiny. Bringing in 2.4 million immigrants, many of whom would prefer the opportunities available in America, was not a great idea.
Canadians like to think they have a special relationship with the US—and they do, except not in the current political environment. Prime Minister Trudeau is no fan of Trump, and the feeling is mutual. Last January, Trudeau told a Montreal audience, “we were able to manage Mr. Trump.”
After the January 6, 2020, Capitol Hill riot, Trudeau chirped, “What we witnessed was an assault on democracy by violent rioters, incited by the current president and other politicians.”
Trump was more succinct with his comments about Trudeau, calling him a “far-left lunatic.”
The tariff news is devastating for Ontario and Quebec, where thousands of jobs are reliant on exports south of the border. To that end, Ontario Premier Doug Ford and premiers from other provinces are demanding a meeting with Trudeau.
Alberta may get a pass. After all, winter is coming, and the US needs Canadian oil. Even Trump knows it is bad politics to make your constituents unable to heat their homes or drive their cars.
The news also throws a spanner into the upcoming Bank of Canada monetary policy discussions, as policymakers will need to factor recession risks into the equation.
WTI Oil Prices
WTI oil prices are trading near the top of the 68.59-69.69 range seen overnight.
Selling pressure is emerging after reports that Israel and Hezbollah are close to a cease-fire agreement.
USDCAD Technicals
The intraday technicals are bullish, with the break above resistance in the 1.4040-60 area extending gains to 1.4178.
The sharp spike overnight suggests a period of consolidation, with the 1.4170 peak acting as a cap while 1.4040 should become support.
USDCAD has moved into a new trading band between 1.3880-1.4170 and should see plenty of price movement within these bands. A topside break will extend gains to the Covid peak of 1.4660.
For today, USDCAD support is 1.4070 and 1.4040. Resistance is 1.4140 and 1.4170.
Today’s Range: 1.4040-1.4140
Chart: USDCAD weekly
Source: Oanda.com
Biden Pardons Turkey
It’s a US presidential Thanksgiving tradition since 1989—that of pardoning a turkey, thus saving it from being someone’s dinner centerpiece. President Biden pardoned two birds, Peach and Blossom. When the news went out, Donald Trump tweeted, “It’s about time! He knew I was innocent.”
Trade War Fears Sink Equities
Trump’s tariff threat (promise) knocked Asian equity indexes lower, with Japan’s Topix falling 0.90% and Australia’s ASX 200 losing 0.69%.
European bourses are floundering, with a 0.54% slide in the French CAC 40 index leading the pack lower.
S&P 500 futures are bucking the trend and are up 0.16%. US 10-year Treasury yields are at 4.29%.
FOMC Minutes
The FOMC minutes are unlikely to cause much of a stir due to the availability of fresh forecasts at the December 18 meeting.
Trump is now the most important factor for traders.
EURUSD
EURUSD traded choppily in a 1.0425-1.0521 range and is near the top of that band in NY.
The low occurred as risk aversion surged when Trump made his latest tariff announcements.
EURUSD traders breathed a sigh of relief when they realized Trump did not mention the Eurozone.
Traders are still undecided about whether the ECB cuts rates 25 bps or 50 bps at the December 12 meeting.
GBPUSD
GBPUSD dropped then popped inside a 1.2507-1.2593 range and is trading at 1.2580 in NY.
The BRC shop price index fell 0.6% compared to -0.8% last month, but the news was overshadowed by Trump’s tariff tweet.
GBPUSD is getting a bit of support after economists at NatWest bank predicted elevated UK interest rates due to sticky inflation will underpin the currency against many other G-7 currencies.
USDJPY
USDJPY bounced around in a 153.55-154.49 range.
Renewed risk aversion sentiment due to Trump tariff announcements, lower US Treasury yields, and BoJ rate-hiking sentiment are weighing on prices.
AUDUSD and NZDUSD
AUDUSD got sideswiped by the tariff talk and dropped from 0.6507 to 0.6434 before rebounding to 0.6493.
NZDUSD is at the top of its 0.5797-0.5857 range, with traders awaiting tomorrow’s RBNZ rate decision.
A 50 bp rate cut to 4.25% is expected.
USDMXN
USDMXN spiked from 20.2990 at yesterday’s close to 20.7535 before dropping to 20.4520 in NY.
The price action is due to the latest tariff threat.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC Fix: 7.1910 vs exp. 7.2357 (prev. 7.1918)
Shanghai Shenzhen CSI 300 fell 0.21% to 3840.18
Trump’s tariff plans for Mexico (an additional 25%) have spooked many Chinese companies who have invested in factories in Mexico as a back-door entry into the US market. Many are rethinking those investments.
Chart: USDCNY and USDCNH
Source: Investing.com
