March 5, 2025
- Germany plans to rearm by spending €500 billion
- Peace talk and data boost EUR and GBP.
- USD extends yesterday’s losses-EUR outperforms
FX at a Glance
USDCAD: open 1.4428, overnight range 1.4377-1.4450, close 1.4393
USDCAD went for a joyride yesterday, soaring to 1.4542 from 1.4405, then sinking just as quickly to 1.4370. “Tariffs-on, Tariffs-off, No Peace Deal-No Peace Deal.”
USDCAD is starting today’s session near the bottom of its overnight range after U.S. Commerce Secretary Howard Lutnik suggested Canada and Mexico could see tariff relief as early as today. Don’t bet on it.
Lutnik is a sycophant personified. The proof is in his comments from yesterday. He said, “Both the Mexicans and the Canadians were on the phone with me all day today trying to show that they’ll do better, and the president’s listening, because you know he’s very, very fair and very reasonable.” On one hand, he is trying to show how important he is to the Trump administration, and on the other hand, he proves he is just another lackey trying to curry favor with his boss. Fair and reasonable are not adjectives used to describe Trump.
Trump did not say anything about tariff relief in his 100-minute speech to Congress last night. In fact, he warned about a “little disturbance,” before going on about how great he is. The needle was buried on bullish meters worldwide, with the AI accuracy score 3.5/10.
WTI oil prices dropped to 66.97 from 68.10 due to uncertainty around demand because of Trump’s trade war. OPEC’s decision to increase production in April isn’t helping matters.
USDCAD downside is limited due to the likelihood that the Bank of Canada is forced to cut interest rates deeper and faster due to the negative impact of tariffs on the economy if the trade war lasts more than a few months. However, today’s ADP suggests USDCAD data-based gains will be a struggle as well. ADP reported a mere 77,000 jobs were added in February, the smallest level of gains since July, with trade and transportation, health care and education, and information showing job losses.
U.S. Services PMI is expected to tick down to 52.6 from 52.8 in January, while factory orders rise 1.6% compared to -0.9% previously.
USDCAD Technicals.
The intraday USDCAD technicals are bearish following the move below 1.4390 yesterday and looking to test support in the 1.4350-60 area. Bollinger band, MACD and RSI analysis on hourly chart point to more range trading.
The daily chart shows USDCAD remains in an uptrend with Bollinger bands confirming bullish momentum is intact.
For today, USDCAD support is 1.4350 and 1.4310. Resistance is at 1.4440 and 1.4490
Today’s Range: 1.4350-1.4450
Chart: USDCAD daily
A Fourth Reich?
Germany plans to re-arm. Germany’s soon-to-be Chancellor Friedrich Merz extracted an agreement with the Social Democrats to spend €800 billion to bolster the military and infrastructure. German officials are acting like they believe NATO will no longer include the U.S. The news helped spark a massive stock market rally that saw the German DAX soar 3.38% and the French CAC gain 1.92% today.
EURUSD
NY Open: 1.0698, Overnight Range: 1.0602-1.0722
EURUSD bears are roadkill as the single currency has soared over 3.0% since Monday, rising from 1.0370 to 1.0722 today. The German defense/infrastructure plan could boost German growth by 2% in 2026. The EURUSD gains are also on the back of reports that a contrite Zelenskyy is willing to work with the Americans to secure a peace deal. Yesterday, tariff protesters in Ottawa held up a sign that read “You can’t spell Russia without USA,” a conclusion already reached by Ukraine. Eurozone data, including Service PMI and PPI, was ignored.
GBPUSD
NY Open: 1.2833, Overnight Range: 1.2768-1.2865
GBPUSD joined the EURUSD rally party in anticipation of a new arms race to combat what appears to be a new U.S./Russia alliance. GBPUSD also rallied on the back of improved risk sentiment, which got an added lift after China set its 2025 GDP growth target at 5.0%, despite Trump’s trade war. UK PMI data was not a factor.
USDJPY
NY Open: 149.31, Overnight Range: 149.10-150.18
USDJPY traded defensively throughout the European session and in early NY. Support from the rebound in the U.S. 10-year yield to 4.25% yesterday faded as the focus shifted to the prospect of additional BoJ rate hikes, sooner rather than later.
AUDUSD
NY Open: 0.6284, Overnight Range: 0.6234-0.6291
AUDUSD rallied on the back of improved risk sentiment and China’s latest GDP forecast, opening at the top of its range in NY. AUDUSD was also boosted by higher-than-expected Q4 GDP, which rose 1.3% y/y compared to 0.8% previously.
NZDUSD
NY Open: 0.5681, Overnight Range: 0.5638-0.5690
NZDUSD is trading with a bullish bias due to the improved outlook for growth in China and broad-based U.S. dollar weakness as Trump’s tariffs threaten to drive the U.S. economy into recession. The currency pair barely reacted to news that RBNZ Governor Adrian Orr suddenly resigned for “personal reasons.”
USDMXN
NY Open: 20.5673, Overnight Range: 20.4853-20.6659
USDMXN is being whipsawed by tariff talk. President Claudia Sheinbaum said the government will wait until Sunday to announce its retaliatory tariff measures. USDMXN retreated from its peak after Commerce Secretary Lutnik suggested a tariff deal may be reached.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1714 vs exp. 7.2575 (prev. 7.1739)
Shanghai Shenzhen CSI 300 rose 0.5% to 3902.57
Chinese Caixin Services PMI (Feb) 51.4 vs. Exp. 50.8 (Prev. 51.0); Composite PMI (Feb) 51.5 (Prev. 51.1)
China has set its 2025 GDP growth target at approximately 5% and aims for consumer price inflation (CPI) of around 2%, while pledging to implement a more proactive fiscal policy.
Sources: Yahoo Finance, Oanda, Investing.com,
