January 30, 2025
- FOMC delivers as expected and annoys President Trump.
- ECB cuts rates and says policy remains restrictive
- USD opens mixed after quiet overnight session.
FX at a Glance
USDCAD open 1.4415, overnight range 1.4393-1.4436, close 1.4383
The Bank of Canada cut rates by 25 bps, surprising no one, but it announced the end to quantitative tightening, which surprised a few. The Monetary Policy Report predicted economic growth at 1.8% in 2025 and 2026 and core inflation falling to 2.1% by the end of 2025. But those forecasts did not consider tariffs.
Trump (and his press secretary) said that tariffs would come into effect on February 1. Commerce Secretary Nominee Howard Lutnik said the threat is merely a lever to force Canada to take swift action on illegal immigrants and fentanyl entering the US. If so, it is sure to annoy American drug and gun smugglers, who seem to have unfettered access into the country from the US side.
Canada plans to retaliate against US tariffs with tariffs of its own, and an often-talked-about idea is to restrict or cut off altogether Alberta oil exports to the US. Alberta Premier Danielle Smith said that Alberta will not agree to export tariffs or any measure that impacts the flow of oil. Canada’s soon-to-be-ex Minister of Energy tried to smooth over the issue by saying, “No one province or territory will be favoured or penalized over another. If there is pain, Quebec will feel it, Ontario will feel it, the West will feel it, Atlantic Canada will feel it. You cannot single out the West. It has to be something that is going to be fair.”
Oil prices are sliding lower. WTI fell to 72.02 from 73.08 due to the lingering impact of rising US crude inventories. The EIA reported crude stocks rose by 3.46 million barrels last week. Furthermore, Trump is tweeting about “unleashing American energy production.”
USDCAD Technicals
The intraday USDCAD technicals are unchanged. They are bullish above 1.4380 and looking for a break above 1.4460 to target 1.4500. then 1.4550. A move below 1.4380 targets 1.4340.
USDCAD has been trapped in a 1.4250-1.4515 range since December 18 and that will not change today. The longer term technicals are bullish while trading above 1.4310 and looking for a break above 1.4520 to kick off the next leg of the rally with a target of 1.5000.
For today, USDCAD support is 1.4380 and 1.4340. Resistance is 1.4460 and 1.4500
Today’s Range: 1.4380-1.4470
Chart: USDCAD daily
ECB Does the Expected
The ECB cut interest rates by 25 bps to 2.75%, but said monetary policy remains in restrictive territory and left its previous guidance largely unchanged. President Lagarde’s press conference has not started and so far the market reaction is muted.
FOMC Stays the Course But GDP Misses
The FOMC left rates unchanged, and the somewhat hawkish tilt in the statement was explained away by Powell in his press conference. Mr. Powell said the change in the line that inflation “has made progress toward the Committee’s 2 percent objective but remains somewhat elevated” to “remains somewhat elevated” was merely an edit and not a policy change signal. Mr. Powell reiterated that the Fed does not “have to be in a hurry to adjust our policy stance.”
He may need to change his tune by March if GDP continues to fall Q4 GDP missed the forecast and rose 2.3% y/y in Q4 compared to the forecast of 2.6%%, and well below the 3.1% seen previously. However weekly jobless claims were a bright spot with claims falling 16,000 to 207,000.
Trump Peeved by Powell
President Trump was very unhappy with the Fed decision, and he took to TruthSocial to complain. “Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again! The Fed has done a terrible job on Bank Regulation. Treasury is going to lead the effort to cut unnecessary Regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, “green” energy, and fake climate change, Inflation would never have been a problem. Instead, we suffered from the worst Inflation in the History of our Country!”
EURUSD
NY Open: 1.0396
Overnight Range: 1.0396-1.0429
EURUSD is at its overnight session low ahead of today’s ECB meeting and following news that the German economy shrank by 0.2% y/y in Q4, while the Eurozone economy stagnated. Euro area Economic Sentiment and Employment Expectations rose, but the results were ignored with the ECB meeting looming. A dovish outcome would see EURUSD drop to 1.0300.
GBPUSD
NY Open: 1.2426
Overnight Range: 1.2426-1.2462
Sterling is following EURUSD lower, which is more a factor of lingering US dollar strength after the FOMC left rates unchanged. Chancellor Rachel Reeves outlined her plan to jumpstart the UK economy with some infrastructure projects, but it has been met with mixed reviews. One critic, Reform UK MP Richard Tice, said, “The revelation was they’ve got a big plan to create short-term growth by investing in a long-term runway that we know will never be built, in about 20 to 30 years’ time.”
USDJPY
NY Open: 154.52
Overnight Range: 154.28-155.24
USDJPY traded lower on the back of rising expectations that the Bank of Japan will raise interest rates again. Yesterday, Deputy Governor Ryozo Himino said that rates will rise if the economy and prices move in line with the forecast.
AUDUSD
NY Open: 0.6224
Overnight Range: 0.6215-0.6244
AUDUSD is little changed from yesterday but trading with a slight negative bias. The prospect of RBA rate cuts while the Fed remains on hold is weighing on prices. In addition, Asian trading remains lighter than usual due to Lunar New Year holidays.
NZDUSD
NY Open: 0.5645
Overnight Range: 0.5639-0.5668
NZDUSD is rangebound for similar reasons to AUDUSD. The FOMC left rates unchanged, and the RBNZ will be lowering them. New Zealand Business Confidence fell to 54.4 in January from 62.3 in December.
USDMXN
NY Open: 20.4928
Overnight Range: 20.4425-20.5362
USDMXN is trading with a moderately bearish bias, helped by yesterday’s slightly better-than-expected unemployment rate. Prices were also weighed down by Commerce Secretary nominee Howard Lutnick, who suggested tariff threats were just a “lever” to extract concessions.
BTCUSD (Bitcoin)
NY Open: 105,370
Overnight Range: 101,420-105,780
Bitcoin dropped, then popped overnight and is sitting near the top of the range. Traders are optimistic after recent developments, including Trump’s executive order that promoted US leadership in digital assets and the Czech central banker mulling adding BTCUSD to reserves.
FX high, low, open (as of 6:00 am ET)
China Snapshot
Closed Lunar New Years
PBoC Fix: 7.1698 (prev. 7.1705) as of January 27, 2025
Shanghai Shenzhen CSI 300 rose 0.41% to 3817.08-close January 27
Chart: USDCNY
Source: Investing.com, YahooFinance.
