February 20, 2025
- Canada’s tariff defence- a railway to Quebec.
- FOMC minutes reveal a very cautious Committee.
- USD opens on the defensive, JPY outperforms
FX at a Glance
USDCAD: open 1.4206, overnight range 1.4204-1.4245, close 1.4239
Canada has a defense for President Trump’s tariff plans. Soon-to-be-former Prime Minister Justin Trudeau unveiled an ambitious plan to spend $60-$90 billion on a high-speed rail link between Toronto and Quebec, which is exactly what British Columbians, and all the Western Provinces were hoping for. They won’t need to prosper from selling lumber, oil, potash, or grain to Americans because there will be plenty of jobs laying track and building infrastructure. The only issue is that whey will be forced to relocate. Trudeau wasn’t very clear if, in keeping with his government’s climate-change, anti-oil agenda, the trains would be solar- or wind-powered.
WTI oil prices are drifting in a 71.73-72.38 range, with gains limited by a higher-than-expected increase in US crude inventories, according to yesterday’s API report. Prices are further undermined by Trump’s threat of 25% tariffs on cars, which could spark a global economic slowdown.
US weekly jobless claims rose by 5,000 to 219,000, while the Philadelphia Fed Manufacturing Survey rose 18.1compared to 44.3 last month. The Philly data is relatively positive as is shows regional activity continuing to expand. Canada releases the New Housing Price Index fell 0.1% in January, the same as it did in December. The Raw Material Price Index rose 3.7% from 1.3% in December.
USDCAD Technicals
The intraday USDCAD technicals are bearish below 1.4240 and looking for a break below 1.4200 to extend losses to 1.4170. A move above 1.4240 targets 1.4310.
Longer term, the USDCAD uptrend from October 7 is intact while prices are above 1.4160. The Bollinger bands suggest a modest negative bias while prices are below 1.4250. A move above 1.4250 suggests further gains to 1.4360. Support is at 1.4140.
For today, USDCAD support is 1.4180 and 1.4150. Resistance is at 1.4250 and 1.4290.
Today’s Range: 1.4190-1.4270
Chart: USDCAD daily
Fed Raises Caution Flag
The FOMC minutes revealed a cautious Committee. The minutes said, “A majority of participants observed that the current high degree of uncertainty made it appropriate for the committee to take a careful approach in considering additional adjustments to the stance of monetary policy.” Fed Vice Chair Philip Jefferson confirmed the view yesterday when he said, “I believe that, with a strong economy and a solid labor market, we can take our time to assess the incoming data to make any further adjustments to our policy rate.”
Equity Traders are Undecided
Asian equity traders dumped stocks partly because of Trump throwing Ukraine to the Russian bear, which increased negative risk sentiment. Australia’s ASX 200 index fell 1.14%, but it got a helping hand from somewhat hawkish comments by the RBA governor. Japan’s Topix tumbled 1.18%, with rate hike fears exacerbating the losses. European bourses are in the green, led by a 0.69% rise in the French CAC 40 index. S&P 500 futures are down 0.13%, while the US 10-year Treasury yield dipped to 4.517%.
EURUSD
NY Open: 1.0443, Overnight Range: 1.0419-1.0444
EURUSD ticked higher on broad US dollar weakness due, in part, to the belief that Trump’s tariff threats are more about extracting trade concessions than starting a global trade war. The prospect of an end to the Russia-Ukraine war is also improving global risk sentiment, although not so much in Europe. The EURUSD technicals are bullish above 1.0400, with a break above 1.0450 targeting 1.0510.
GBPUSD
NY Open: 1.2617, Overnight Range: 1.2579-1.2620
GBPUSD traded inside yesterday’s range but has a mild bid to start today’s session. GBPUSD is supported after this week’s economic data, including higher-than-expected inflation numbers, suggested that the BoE would be far more cautious before cutting rates again.
USDJPY
NY Open: 150.07, Overnight Range: 149.95-151.47
USDJPY smashed through support at 151.20, which triggered a wave of stop-loss selling, then dropped to 149.95. The catalyst was renewed speculation that the Bank of Japan would raise rates as soon as July after the yield on the JGB 10-year bond touched 1.459%, its highest level since 2009. USDJPY losses may be extended tomorrow if Japanese inflation numbers are hotter than expected.
AUDUSD
NY Open: 0.6379, Overnight Range: 0.6328-0.6381
AUDUSD got a boost from a stronger-than-expected employment report. Australia added 40,000 new jobs (forecast 20,000), while the jobless rate rose to 4.1%, as expected. The RBA just cut rates by 25 bps on Tuesday, but Governor Michelle Bullock warned labor market tightness could preclude further cuts. AUDUSD also saw a bit of support from President Trump’s seemingly conciliatory comments suggesting the US could avoid a trade war with China.
NZDUSD
NY Open: 0.5731, Overnight Range: 0.5694-0.5732
NZDUSD recouped yesterday’s losses after the RBNZ cut rates by 50 bps to 3.75, as expected. Governor Adrian Orr said that although he expects the OCR rate will hit 3.0% by year-end, another 50-bps rate cut was unlikely unless there was an economic shock, which supported prices. Bloomberg economist James McIntyre warned that the danger lies in inflation and growth undershooting the RBNZ target. He expects another 125 bps in rate cuts over the next 12 months.
USDMXN
NY Open: 20.3851, Overnight Range: 20.3811-20.4748
USDMXN traded sideways overnight, then declined to the low in early NY trading. Prices declined after negative risk sentiment from Trump’s latest salvo of tariffs on cars and pharmaceuticals faded due to the lack of detail and belief that the threat is all bark, no bite.
BTCUSD
NY Open: 97,507, Overnight Range: 95,632-97,511
Bitcoin eked out gains following Trump’s remarks at the FII PRIORITY Summit in Miami yesterday. He said, “I’ve signed executive orders to keep the United States at the forefront of artificial intelligence and to end Joe Biden’s war on Bitcoin and crypto. We ended that war totally. That war’s over.” However, the lingering supply from FTX liquidation limited gains.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1712 vs exp. 7.2856 (prev. 7.1705).
Shanghai Shenzhen CSI 300 fell 0.29% to 3928.90
PboC leaves rates unchanged as expected. 1year Loan Prime Rate (LPR) 3.10%, 5-year LPR 3.60%.
President Trump appeared to “make nice” when he praised China President Xi Jinping, and saying he has a “great relationship.” Then he said it would be possible to reach a new trade deal with China. The markets barely budged on his remarks because Mr Trump has a penchant for saying one thing and doing another.
Sources: Yahoo Finance, Oanda, Investing.com,
