February 12, 2025
- US CPI rises more than expected
- Fed Chair Powell is in no hurry to lower rates.
- USD opens mixed-Sterling outperforms.
FX at a Glance
USDCAD open 1.4308, overnight range 1.4280-1.4340, close 1.4285
USDCAD appears to be defying gravity in the face of a looming trade war with the US and is hovering just above major support. USDCAD is on the defensive due to broad US dollar weakness despite the 10-year CAD/US interest rate spread widening to -145.1 from 142.1 yesterday while the two year spread widened to -184.6 from -181.4.
That changed after the hotter than expected US inflation report which saw Core-CPI monthly, and annually rising more than expected. USDCAD popped from 1.4304 to 1.4340 on the news but has since drifted back.
WTI oil prices are steady in a 72.26-73.23 range with concerns about a resumption of hostilities in Gaza, and Trump’s executive order to keep pressure on Iran, reviving the risk of Middle East supply disruptions.
In addition to Powell’s testimony to the House Fed policymakers Bostic and Waller will discus their outlooks for monetary policy.
USDCAD Technicals
The intraday USDCAD are slightly bearish while trading below 1.4360 and are looking for a break below support in the 1.4240-1.4270 area to extend losses to 1.4190. A move above 1.4360 negates the short-term selling pressure and targets 1.4450.
The daily chart shows Bollinger Bands suggesting further downside pressure although they also warn of increased volatility as USDCAD while the RSI indicates USDCAD is becoming oversold.
For today, USDCAD support is 1.4270 and 1.4240. Resistance is 1.4340 and 1.4380
Today’s Range: 1.4270-1.4370.
Chart: USDCAD daily
CPI Heats Up
US January inflation numbers a were hotter than anticipated, as the headline number rose 3.0% y/y (forecast 2.9%) and Core-CPI rose to 3.3% (forecast 3.1% y/y). Markets were unimpressed with S&P 500 futures dropping 0.88% from around flat, pre-data and gold (XAUUSD) dropping to $2864.23 from $2876.02. The US 10-year Treasury yield spiked from 4.532% pre-data to 4.638% afterwards. The results ensure that Fed Chair Powell will reiterate that the Fed is in “wait-and-see” mode. When he testifies before the House Financial Services Committee today.
EURUSD
NY Open: 1.0376 Overnight Range: 1.0317-1.0380
EURUSD drifted higher in the wake of a softer US dollar against many of the major currencies the dropped to the range low, post CPI. Traders are ignoring the looming tariff threat from the US. In addition, Powell’s comments were not anything new, and there was a dearth of actionable Euro area economic data. Traders are also looking ahead to the German election on February 23. Germany’s conservative CDU/CSU alliance is expected to form the next government with Friedrich Merz as Chancellor.
GBPUSD
NY Open: 1.2441 Overnight Range: 1.2390-1.2466
GBPUSD consolidated yesterday’s gains after comments by a BoE policymaker put a damper on further rate cuts but retreated in the wake of the hotter-than-expected US inflation numbers. The National Institute of Economic and Social Research (NIESR) warned that persistent wage growth, higher government spending, and a weaker currency will limit the BoE’s ability to cut rates. They predict just one more cut in 2025.
USDJPY
NY Open: 153.57 Overnight Range: 152.39-154.45
USDJPY rallied hard in early Asia and never looked back. It accelerated further after the US inflation numbers boosted the US 10-year Treasury yield and remains bid due to the latest US steel and aluminum tariffs threat. BoJ Governor Ueda warned that the pace of monetary policy adjustment will depend on economic conditions and expressed concern about rising food inflation.
AUDUSD
NY Open: 0.6278 Overnight Range: 0.6239-0.6310
AUDUSD gave back its Asian gains and accelerated losses after the US data. Australian Prime Minister Albanese suggested that after talking to Trump, Australia may get an exemption from the steel tariffs. However, after the call, Trump told reporters that there would be no exemptions.
NZDUSD
NY Open: 0.5638 Overnight Range: 0.563050.5672
NZDUSD inched higher in Asia, then started to slide just before Europe opened. It continued downwards after the US inflation data. . Sentiment was bearish as the Fed is in no hurry to lower rates while the RBNZ is expected to cut rates on February 19.
USDMXN
NY Open: 20.5643 Overnight Range: 20.5438-20.6311
USDMXN traded sideways, albeit with a modest bid tone due to Powell’s remarks to Congress and the imposition of steel and aluminum tariffs on exports to the US .
BTCUSD
NY Open: 96,131 Overnight Range: 94,398-98,319
Bitcoin traded sideways due to caution following Trump’s tariffs on steel and aluminum, which increased geopolitical tensions. The ongoing liquidation of FTX cryptocurrency, with the first disbursements scheduled for Feb 18, is also a drag on gains.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1710 vs exp. 7.2971 (prev. 7.1716)
Shanghai Shenzhen CSI 300 rose 0.95% to 3919.89
Stock market rally ignores ailing property market. Bloomberg reports that China’s bail-out of developer China Vanke Co.is evidence that things are getting worse not better. The crisis threatens to weaken Xi Jinping’s ability to negotiate with Trump.
