April 7, 2025
- Global equity indexes plunge.
- Fed Chair Powell in no hurry to change monetary policy.
- US dollar rallies across the board compared to Friday open.
FX at a Glance
USDCAD: open 1.4262, overnight range 1.4195-1.4269, close 1.4226
USDCAD is quietly bid but well inside Friday’s range. Canada lost a lot of jobs in March (actual 32,600) and the results were weak. But that is old news. Traders were focused on Trump’s tariffs and the stock market meltdown.
Canada may have dodged the US 10% minimum tariff but the pre-existing tariffs on steel, aluminum, lumber, potash, and oil are a negative for domestic growth.
WTI oil prices dropped to 58.98 from 60.98 before opening in NY at 59.98. Saudi Arabia exacerbated the negative crude outlook when it announced a $2.50 price cut for the flagship Arab Light oil for Asian customers starting in May.
The news comes on the heels of last week’s announcement that OPEC would increase production by 411,000 b/day rather than the 135,000 they had announced previously.
The Bank of Canada Business Outlook Survey is released today but it will be ignored as the survey was conducted before the Trump tariff tantrums.
There are no US economic reports today.
USDCAD Technicals
The intraday USDCAD technicals are modestly bullish but need to break above 1.4280 to suggest further gains are likely. Failure to do so risks another test of trendline support at 1.4150.
The medium-term technicals are slightly bearish below 1.4350 with a break below 1.4240 suggesting another test of the uptrend support line at 1.4150.
For today, USDCAD support is 1.4210 and 1.4150. Resistance is at 1.4280 and 1.4330.
Today’s Range: 1.4210-1.4310.
Chart: USDCAD 1 day
Powell is Patient
Friday, Fed Chair Jerome Powell said that he was in no hurry to cut rates. “We’re well positioned to address whatever may come. And in the meantime, I’d say we’re waiting for greater clarity before we consider adjustments.” Those adjustments may start in June followed by two more 25 bp rate cuts by year end, according to Goldman Sachs. They also raised its odds for a US recession to 45% and expect the Fed to cut rates three times in 2025, starting in June.
JPMorgan expects US GDP growth to shrink by 0.3% in 2025, which prior to Trump’s tariffs was 1.3%.
Global Equity Market Carnage
Global equity markets are in full-panic mode. Bloomberg estimates that Trump’s “Liberation Day” tariffs have liberated $9.5 trillion off global equity prices.
Wall Street closed with steep losses on Friday and Asia’s equity traders joined in the rout. Hong Kong’s Hang Seng plunged 13.22%, Japan’s Topix lost 7.79%, and Australia’s ASX fell 4.23%.
The bloodletting continues in Europe. As of 8: 00 am EDT, the German DAX is down 4.88% and French CAC 40 is losing 5.12% while the UK FTSE 100 is down 4.80%.
Wall Street is poised to open in the sewer. S&P 500 futures are down 2.84% and the US 10-year Treasury yield is sitting at 4.012% after trading in a 3.878–3.974% range overnight.
The CBOE VIX index surged 16.5% to 52.9%, which is where it was in the dark, early days of the pandemic when COVID was spooking investors.
JPMorgan expects US GDP growth to shrink by 0.3% in 2025, which prior to Trump’s tariffs was 1.3%. Goldman Sachs raised its odds for a US recession to 45% and expects the Fed to cut rates three times in 2025, starting in June.
EURUSD
NY Open: 1.0966, Overnight Range: 1.0878-1.1050
EURUSD is choppy but has a bit of a bid demand for the single currency increases because it is a liquid alternative to the US dollar. European leaders are at their timid best and are expected to retaliate to Trump’s tariffs very carefully. Various EU officials warned that the Trump tariff impact could knock between 0.05 and 1.00% off GDP.
GBPUSD
NY Open: 1.2846, Overnight Range: 1.2830-1.2934
GBPUSD gave back all of Friday’s gains and traded with a negative bias. Prices are at the session low in NY undermined by an increase in the odds for a May 8, BoE rate cut of 25 bps to 92, and that move would be followed by at least 2 more 25 bp cuts.
USDJPY
NY Open: 146.23, Overnight Range: 144.82-146.85
USDJPY had a wild ride overnight. Prices gapped lower at the Asian open, then traded erratically as safe-haven demand yen flows were offset by fears of growth-killing US tariffs. Japan’s Prime Minister is reportedly planning talks with the Trump administration in hopes of tariff relief.
AUDUSD
NY Open: 0.6018, Overnight Range: 0.5934-0.6061
AUDUSD got hammered and is trading with a negative bias on fears of a global recession. China retaliated to Trump’s tariffs with tariffs on US imports, and fears of a prolonged trade war between the US and China (Australia’s largest trading partner) are driving prices lower.
NZDUSD
NY Open: 0.5575, Overnight Range: 0.5521-0.5602
NZDUSD is trading defensively, and in the middle of its overnight range ahead of the RBNZ monetary policy decision on April 9. Global risk-off sentiment is weighing on prices.
USDMXN
NY Open: 20.1424, Overnight Range: 20.4771–20.28098
USDMXN rallied on the back of global risk-aversion sentiment from plunging equity markets ahead of Banxico’s monetary policy meeting Thursday when a 50 bps rate cut to 9.00% is expected.
FX high, low, open (as of 6:00 am ET)
China Snapshot`
PBoC fix: 7.1980 vs exp. 7.3162 (Prev. 7.1889).
Shanghai Shenzhen 300 falls 7.05% to 3589.44.
Central Huijin Investment – a subsidiary of China’s sovereign wealth fund, China Investment Corporation has reportedly been intervening to support Chinese stock markets.
Sources: Yahoo Finance, Oanda, Investing.com, Bloomberg.
