January 16, 2025
- Ontario Premier Doug Ford steps up to fill leadership void on tariff file.
- US data is positive, FX barely reacts
- USD opens mixed in uneventful session.
FX at a Glance
USDCAD open 1.4372, overnight range 1.4323-1.4393, close 1.4341
USDCAD is trading with a bid after failing to sustain yesterday’s losses following a slightly better than expected US inflation report. USD CPI dipped slightly which sparked an outsized dollar sell-off, even though the result show inflation remains elevated.
There is leadership in Canada, but not at the federal level. Ontario Premier Doug Ford led his fellow premiers in crafting a response if Trump levies tariffs on Canadian imports starting Monday. Trudeau was at the meeting because he is still Prime Minister, but no one cared what he had to say.
Nine of 10 premiers signed a communique that included, “First Ministers are committed to continuing to work together on a full range of measures to ensure a robust response to possible U.S. tariffs, including supports for sectors, businesses, and individuals.” Alberta Premier Danielle Smith did not sign as export tariffs on energy were not excluded.
The pending Trump inauguration and the tariff threat ensures that USDCAD downside is limited.
USDCAD Technicals
The intraday USDCAD flipped to bullish. The failure to extend losses below 1.4300 combined with the move above 1.4340 have put 1.4450 in the picture. The risk of 25% tariffs on Canadian imports to the US next week ensures limited downside.
A decisive break above 1.4500 suggests a move to 1.5000 although resistance at 1.4520 could slow gains.
For today, USDCAD support is 1.4340 and 1.4310. Resistance is 1.4510 and 1.4550
Today’s Range: 1.4340-1.4440
Chart: USDCAD daily
US Data Dump Trumped
The US unloaded a ton of data which painted a picture of a still healthy economy. Weekly jobless claims rose 14,000 to 217,000 (forecast 210,000) but are still at historically strong levels. Philadelphia Fed soared to 44.3 (forecast -5), Retail Sales rose 0.4% (forecast 0.6%) with any disappointment offset by the Retail Sales Control group which rose 0.7% (forecast 0.4%). Business Inventories and NAHB Housing Market Index are up next. There was a muted reaction the data as traders are focused on Trump.
“Strong Dollar is Critical”
Bloomberg is reporting that Scott Bessent, the nominee for Treasury Secretary, will tell the Senate that a strong dollar is critical to the US economic health, saying “critically, we must ensure that the US dollar remains the world’s reserve currency.”
You won’t find a lot of US dollar sellers after that comment, at least today.
EURUSD
NY open 1.0286, overnight range 1.0259-1.0655
EURUSD gave back all of its post-US CPI gains with traders awaiting this morning’s US data dump. German CPI ticked higher in December, rising 0.5% m/m compared to expectations for a 0.4% gain.
GBPUSD
NY open 1.2203, overnight range 1.2190-1.2248
Sterling’s post-US CPI rally was short-lived. UK data took care of that. A slew of economic reports were weaker than expected, including November GDP which only rose 0.1% m/m (forecast 2.0%). Manufacturing Production fell 0.3% m/m (forecast 0%), while Industrial Production dropped by 0.4% m/m (forecast 0.1%). The 10-year Gilt yield climbed to 4.745%, which weighed on the currency pair. Bank of England policymaker Alan Taylor is advocating for further rate cuts because of the weakening economy, and those comments served to cap the upside.
USDJPY
NY open 155.69, overnight range 155.21-156.53
USDJPY traded lower on increased expectations that the BoJ will cut interest rates on January 24 and by increased, but still low odds for two Fed rate cuts in 2025. The 10-year Treasury yield inched down to 4.64% from 4.65%.
AUDUSD
NY open 0.6212, overnight range 0.6196-0.6247
AUDUSD rallied on the heels of a higher-than-expected rise in employment (56,300 vs forecast 15,000 and November 28,200). However, the details were not so great. Full-time jobs fell 23,700, and the unemployment rate ticked up to 4.0% from 3.9%. The uptick in unemployment injects a layer of uncertainty into expectations for the RBA rate cut on February 18.
NZDUSD
NY open 0.5603, overnight range 0.5597-0.5626
NZDUSD drifted down from yesterday’s post-US CPI peak with added selling pressure from AUDNZD demand after Australia’s better-than-expected employment report.
USDMXN
NY open 20.6032, overnight range 20.4570-20.6298
USDMXN gave back its post-US CPI gains and traded higher overnight. Trump’s pending inauguration has put a floor under USDMXN. Today’s price action will be determined by US data.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1881 vs exp. 7.3247 (prev. 7.1883)
Shanghai Shenzhen CSI 300 rose 0.11% to 3800.38
There are reports that the PBoC may cut the Reserve Rate Ratio (RRR) before the Lunar New Year begins (Jan.29)
Chinese authorities who oversee the” Unreliable Entity List” is investigating PVH Group (Calivin Klein, Tommy Hilfiger) for “inappropriate conducts” in the Xinjiang Uyghur Autonomous Region. These actions will further encourage foreign investors to avoid China.
Chart: USDCNY
Sources: Yahoo Finance, Oanda, Investing.com, Global TV
