February 13, 2025
- Trump’s Russia and Ukraine peace talk initiative improves risk sentiment
- Reciprocal US tariffs on Trump’s agenda today.
- USD opens mixed due to tariff concerns and improved risk sentiment
FX at a Glance
USDCAD open 1.4290, overnight range 1.4255-1.4307, close 1.4309
The Bank of Canada Summary of Deliberations from the January 29 monetary policy meeting revealed that policymakers viewed the economy through rose-coloured but heavily smeared glasses.
If it was a weather report it would read “The Governing Council sees sunshine and blue skies with growth, fueled by consumer spending and a resurgent housing market, However, but storm clouds from a hot-air system from the US loom large, with the risk of devastation from massive tariffs. That storm system suggests that the BoC will not be in any hurry to cut rates in March or April.
USDCAD retreated on broad US dollar selling on optimism for an end to the Russian/Ukraine war but it is hard to see why the USDCAD selling pressure will continue. For starters, Canada is a tad removed from Eastern Europe and Canadians are dealing with a tyrant of another sort.
Trump is promising to sign an executive order to impose reciprocal tariffs on countries that have tariffs on US imports. Those tariffs could be on top of existing tariffs.
WTI prices dropped from 71.32 to 70.23 after President Trump announced that Ukraine and Russia were willing to discuss a peace deal. That news combined with the looming Opec production hike and slower demand from China due to tariffs is depressing oil prices. A break below 69.80 suggests further weakness to 68.00.
USDCAD weakness may be from lingering long USDCAD positions being unwound and if so, it also suggests that the downside is limited. CAD/US 10-year yield spreads remain at -142.4
USDCAD Technicals
The intraday USDCAD are slightly bearish while trading below 1.4330 and are looking for a break below support in the 1.4240-1.4250 area to extend losses to 1.4160. A move above 1.4340 suggests further gains to1.4380, then1.4450.
The daily chart shows prices challenging the uptrend channel floor in the 1.4240-50 area. A decsive break suggests a test of support at 1.4170.
For today, USDCAD support is 1.4240 and 1.4210. Resistance is 1.4340 and 1.4380
Today’s Range: 1.4240-1.4340.
Chart: USDCAD daily
“All we are saying….”
He’s bombastic, a braggart, a blowhard, and a serial hyperbolist, and now you can add peacemaker to the list of President Trump’s attributes. No matter how you spin it, he spurred the release of Israeli hostages and got the Arab world to begin taking ownership of the endless Gaza crisis. He managed to get Russia and Ukraine to begin peace negotiations. FX traders, at least those in Europe, reacted by boosting EURUSD. However, the EURUSD rally will likely be reversed if Trump slaps on reciprocal tariffs today, as expected.
Powell and Pals Say Inflation Fight is Not Over
US inflation rose more than expected, solidifying the case for the Fed to leave rates unchanged. Fed Chair Jerome Powell, Chicago Fed President Austan Goolsbee, and Atlanta Fed President Raphael Bostic were united in suggesting that there was still more work to do to tame inflation.
US Producer Price sore 3.5% y/y (forecast 3.2%) while weekly jobless claims fell 7,000 to 213,000.data. FX markets ignored the news.
EURUSD
NY Open: 1.0418 Overnight Range: 1.0383-1.0440
EURUSD rallied on the Russia/Ukraine peace talk story. The gains may be exaggerated as EURUSD positioning is extremely oversold, and today’s move is a much-needed correction. The gains may be reversed if Trump imposes reciprocal tariffs today. German inflation data came in as expected and was ignored.
GBPUSD
NY Open: 1.2496 Overnight Range: 1.2441-1.2518
GBPUSD rallied after Q4 GDP jumped to 1.4% y/y compared to the upwardly revised 1.0% previously and above the 1.1% forecast. However, analysts at ING noted that the details were not very impressive because the growth spurt was all due to a surge in inventories. Household consumption, exports, and business investment were flat or negative. Manufacturing production fell 1.4% y/y in December—less than expected but more than previously. The gains are unlikely to last, supported by BoE Chief Economist Hu Pill’s comment that he expects further rate cuts.
USDJPY
NY Open: 153.79 Overnight Range: 153.77-154.67
USDJPY peaked in Asia, then drifted lower into the NY open. The selling pressure stemmed from improved risk sentiment due to the prospect of Russia-Ukraine peace talks and the outlook for an increase in Japanese interest rates. The rate hike sentiment was supported by the rise in the PPI index to 4.2% from 3.9% y/y. However, yesterday’s jump in the US 10-year Treasury yield, which sits at 4.60% today, is underpinning prices.
AUDUSD
NY Open: 0.6268 Overnight Range: 0.6259-0.6300
AUDUSD underperformed due to the risk of Trump’s plan for reciprocal tariffs on China and Australia. Those fears were reinforced after Trump trade adviser Peter Navarro claimed China-backed Australian aluminum exporters were flooding the US market. Traders ignored the rise in consumer inflation expectations to 4.6% from 4.0%.
NZDUSD
NY Open: 0.5638 Overnight Range: 0.5630-0.5662
NZDUSD tracked Aussie moves, with selling pressure stemming from the threat of tariffs on China and New Zealand. Electronic Card and Retail Sales data were flat, supporting calls for the RBNZ to cut rates next week.
USDMXN
NY Open: 20.5765 Overnight Range: 20.4947-20.6274
USDMXN traded choppily but appeared resilient in the face of increased tariff threats and the hotter-than-expected US inflation report, which suggests the Fed will leave rates unchanged for longer than expected.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1719 vs exp. 7.3000 (prev. 7.1710).
Shanghai Shenzhen CSI 300 fell o.38% to 3905.14
The PboC announced that it will implement the appropriate easy monetary policy while enhancing and stabilizing the FX market.
Sources: Yahoo Finance, Oanda, Investing.com, Google Finance
