January 24, 2025

  • Trump tones down tariff rhetoric for China but not Canada.
  • BoJ hikes rates by 25 bps and hiked its inflation outlook.
  • USD trading lower across the board.

 FX at a Glance

USDCAD open 1.4328, overnight range 1.4315-1.4384, close 1.4385

The Canadian dollar surfed the wave of widespread US selling pressure after President Trump hinted at a thaw in his tariff threats against China. The result was a shakeout of long US dollar positions against the majors, and the Loonie benefited.

However, Trump singled out Canada as one of the nations the US will be demanding respect from. He said, “We’re going to be demanding respect from other nations … Canada has been very tough to deal with over the years. We don’t need them to make our cars, and they make a lot of them. We don’t need their lumber because we have our own forests. We don’t need their oil and gas; we have more than anybody.” Those comments certainly do not support selling USDCAD.

WTI oil prices fell to 74.00 from 75.11, and a lot of that move had to do with a comment from Trump. He said he would ask OPEC to bring down the price of oil because the high prices are supporting Russia’s war with Ukraine.

There are another bunch of chunky option expiries rolling off today at 10:00 am EST, which include $780 million in the 1.4360 area and another $2.3 billion in the 1.4380-85 zone.

Canada Housing Price Index data is on tap. The US Michigan Consumer Confidence Sentiment data is also due, but it is Trump, not data, that is moving markets.

USDCAD Technicals

The intraday USDCAD technicals are modestly bearish below 1.4360 but need to break through support in the 1.4310 area to extend losses.  A move above 1.4360 targets 1.4410

The long term uptrend is intact and USDCAD is close to major resistance in the 1.4400-50 area.  A sustained move above this levels suggest another leg higher with 1.4400 becoming the floor.

For today, USDCAD support is 1.4310 and 1.4280. Resistance is 1.4370 and 1.4410.

Today’s Range: 1.4310-1.4410.

Chart: USDCAD monthly

Yo-Yo Trump

Donald Trump bears no resemblance to Mr. Miyagi, the wise and enigmatic karate master, but he has adapted the concept of “wax on-wax off” to international diplomacy—“Tariffs on-Tariffs off.” Mr. Trump addressed the Davos delegates. His vision for America is self-sufficiency in energy, a friendly business environment that includes lower taxes and less regulation, while “demanding respect from other nations.”

However, what set FX markets ablaze was Trump suggesting he would prefer not to use tariffs on China. Analysts interpreted the remarks as proof that Trump is merely talking tariffs to improve trade negotiation leverage and not angling to incite a global trade war.

EURUSD
NY Open: 1.0489
Overnight Range: 1.0412-1.0515
The single currency climbed due to both Trump’s comments on China tariffs and better-than-expected Eurozone manufacturing PMI, although it is still in contraction territory. Manufacturing PMI rose to 46.1 from 45.1 in December. Trump’s tariff comments sparked a relief rally, but the gains may be more a factor of extended short EURUSD positioning as Trump runs hot and cold.

GBPUSD
NY Open: 1.2431
Overnight Range: 1.2349-1.2448
Sterling got a bit of a lift after flash PMI data topped the forecast and continued to climb due to broad US dollar weakness. According to S&P Chief Business Economist, today’s PMI reports add to the gloom about the UK economy. He notes that companies are cutting jobs and facing increased inflation pressures.

USDJPY
NY Open: 155.93
Overnight Range: 154.85-156.40
It was a yo-yo session for the Japanese yen thanks to inflation and PMI data and the BoJ monetary policy meeting. The BoJ did not surprise anyone when it raised its benchmark rate by 25 bps to 0.5%, the highest level it’s been in 17 years. There was one dissent. Policymakers expect rising wages will underpin inflation. Manufacturing PMI dipped to 48.8 from 49.6 (forecast 49.7), but the sting of that result was soothed by a rise in Services PMI to 52.7 from 50.9.

AUDUSD
NY Open: 0.6320
Overnight Range: 0.6279-0.6331
AUDUSD extended this week’s rally after President Trump downgraded risks for new tariffs on China, which knocked the greenback for a loop against the major G-10 currencies. S&P Global economists note, “Flash Australia PMI data for 2025 brought positive news with Australia’s private sector remaining in growth territory amid rising services activity, while manufacturing output stabilised after falling for over two years straight.”

NZDUSD
NY Open: 0.5712
Overnight Range: 0.5672-0.5722
A rising tide lifts all boats, and a sinking US dollar lifts all currencies. That explains why NZDUSD rallied despite the outlook for unchanged Fed interest rates. The prospect of a 50 bp rate cut by the RBNZ on February 19 suggests gains may be limited.

USDMXN
NY Open: 20.2424
Overnight Range: 20.2136-20.3907
USDMXN is trading at a one-week low due to broad US dollar selling pressure from Trump’s latest tariff remarks. The gains occurred despite higher domestic inflation and increased odds that Banxico will cut rates on February 6.

FX high, low, open (as of 6:00 am ET)

China Snapshot

PBoC Fix: 7.1705 vs exp. 7.2779 (prev. 7.1708

Shanghai Shenzhen CSI 300 rose 0.77% to 3832.85

President Trump appeared to soften his stance on China, telling Fox News that he would rather not use tariffs against China.

JPMorgan analysts are suggesting that the latest rule changes from financial regulators ordering state-owned insurers to invest 30% of new premiums into onshore stocks,  will inject about $138.billion of new capital into the stock market.

Chart: USDCNY

Sources: Yahoo Finance, Oanda, Investing.com,