March 6, 2025
- Ambitious German defence spending plan sparks global rally.
- ECB cuts rates to 2.5% due to falling inflation.
- USD sinks on White House policy disconnect from reality.
FX at a Glance
USDCAD: open 1.4358, overnight range 1.4310-1.4362, close 1.4341
A roller coaster ride on Canada’s Wonderland Leviathan pales in comparison to USDCAD moves on Trump tariff headlines. USDCAD spiked to 1.4543 from 1.4407 on Tuesday when Trump’s 25% tariffs went into effect, then plunged down to 1.4330 yesterday when the White House announced they would be delayed until April.
The delay confirms what many analysts around the world and in the US were saying, which was that Trump’s tariff plans failed to consider that the Canadian and US economies, particularly autos, were so tightly integrated that it would take years to untangle.
Ontario Premier Doug Ford, who is leading Canada’s fight against tariffs, said you can’t trust Trump, and he won’t accept any deal that leaves tariffs in place.
USDCAD option expiries will be a factor around 10:00 a.m. as $1.8 billion of strikes in the 1.4330-1.4355 area roll off, with another $1.7 billion in the 1.4375-1.4400 zone.
In politics, the National Post reports that Foreign Affairs Minister Mélanie Joly briefed Mark Carney on Trump’s tariff plans this weekend but did not do the same for other Liberal leadership candidates. Even worse, Carney is not even a member of Parliament, so he should not be privy to any diplomatic discussions.
WTI oil prices continue to be depressed. A 3.61-million-barrel surge in US crude inventories in the week ending February 28 added to negative sentiment from Trump’s trade war plans. WTI traded in a 66.16-66.90 range.
Canada’s trade surplus widened to $3.97 billion from $1.7 b and beat expectations.
US weekly jobless claims fell by 21,000 to 221,000 but the results were overshadowed by trade war concerns.
USDCAD Technicals.
The intraday USDCAD are bearish after breaking below the short-term uptrend line however, the failure to extend losses below support in the 1.4310 area risks a move above 1.4380 which would then target 1.4420 and 1.4450.
The longer term technicals are bullish above 1.4205 looking for another test of 1.4450, then 1.4500.
For today, USDCAD support is 1.4330 and 1.4310. Resistance is at 1.4410 and 1.4450
Today’s Range: 1.4330-1.4430
Chart: USDCAD daily
Trump Administration Spooks Investors.
President Trump decided to delay the imposition of tariffs on autos after CEO’s from the US “Big Three” automakers explained to him that instead of increasing manufacturing, he would shut down the industry within a week. “Oops!
Stock Markets Stressed
Even worse, Trump (and Vance) have opted to align the US with Russia while kicking traditional allies to the curb. That decision led to Germany’s plan to boost spending by close to €$1 trillion. The sheer size of the program fueled a global bond sell-off and broad-based US dollar weakness. Trump can live with a weaker dollar—in fact he wants one, but he is less enamored with a falling stock market. The S&*P has lost 2.57% (as of yesterdays close) since his inauguration while the Dow Jones Industrial average has fallen 1.1% while the NASDAQ is down 3.79%.
Hong Kong’s Hang Seng index jumped 3.29% on a positive economic outlook from Chinese officials while the falling yen helped to lift the Topix index by 1.22%. European bourses are in the red except the German Dax which has gained 0.23%. S&P 500 futures are down 1.32% and the US 10-year Treasury yield is sitting at 4.29%
EURUSD
NY Open: 1.0791, Overnight Range: 1.0781-1.0823
There is nothing like a near €1.0 trillion stimulus program to rejuvenate a depressed currency. EURUSD has rallied from 1.0360 on Monday to 1.0823 today. The move is expected to boost economic growth across the EU, which may also see further defense spending announced by EU President Ursula von der Leyen.
The ECB surprised no one when they cut rates by 25 bps to 2.50%. The decision was due to falling inflation and projections that the trend would continue. Eurozone Retail Sales rose 1.5% y/y compared to the forecast for a 1.9% gain, but the data was ignored.
GBPUSD
NY Open: 1.2873, Overnight Range: 1.2866-1.2924
GBPUSD traders embraced the widespread US dollar sell-off and bought GBPUSD aggressively, triggering stop losses on the break above 1.2850. The British Chamber of Commerce revised its UK economic growth forecast down to 0.9% y/y in 2025 compared to 1.3% earlier. The downward revision is due to increased cost pressures from the UK budget and global trade uncertainty.
USDJPY
NY Open: 147.85, Overnight Range: 147.70-149.33
USDJPY is getting crushed because of a broad-based belief that the Bank of Japan will hike rates, which is supported by Japan’s largest labor union seeking a 6.1% wage hike in 2025. Furthermore, Trump’s tariffs have raised the risk of a US recession rather sharply, which could compel the Fed to cut rates aggressively.
AUDUSD
NY Open: 0.6326, Overnight Range: 0.6322-0.6357
AUDUSD has pulled back from its overnight session peak due to profit-taking and caution as S&P 500 futures point to another negative day on Wall Street. Australia data helped to underpin prices. Building permits rose 6.3% m/m in January (previous 1.7%), while the trade surplus widened to 5.62 billion from 4.92 billion.
NZDUSD
NY Open: 0.5681, Overnight Range: 0.5720-0.5746
Kiwi rallied on the back of improving risk sentiment and consolidated its recent gains overnight. Analysts consider the gains to be temporary as the price action is being driven by “headlines and uncertainty,” as in the short term, the RBNZ’s dovish monetary policy and a soft economy are weighing on the currency pair.
USDMXN
NY Open: 20.5673, Overnight Range: 20.3772-20.4951
USDMXN gave back all of the gains it made on Tuesday when Trump’s tariffs came into effect. The administration’s subsequent “rethink,” which resulted in a one-month delay for auto tariffs, sparked the reversal. USDMXN direction remains at the whim of Trump’s pronouncements.
BTCUSD
NY Open: 87,822, Overnight Range: 87,822-92,997
The potential global trade destruction from Trump’s tariffs knocked BTCUSD down to 78,651 last Thursday, but prices have rebounded by 16% as of this morning. The gains are due to the belief that tariffs will be scaled back following the steep plunge in US equities and the rising risk of a US recession.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1692 vs exp. 7.2386 (prev. 7.1714)
Shanghai Shenzhen CSI 300 rose 1.38% to 3956.24
Economic officials, including the head of the National Development and Reform Committee (NDRC) Ministry of Finance and Commerce, and the PBoC attended the “Two Sessions” press conference Thursday.
NDRC Chairman Zheng Shanjie said that China will meet its 5% growth target for 2025.
Commerce Secretary Wang Wentao said although China does not want a trade war with the US, it will not back down and is less dependent on exports to the US than in the past.
Finance Minister Lan Foam said the country had enough :reserves: to counter external uncertainties.
PboC boss Pan Gongsheng said rates would be cut this year and that they would keep the yuan stable
Sources: Yahoo Finance, Oanda, Investing.com,
