January 27, 2025
- Tough talking Columbia caves to US demands after Trump puts the hammer down.
- BoC and ECB monetary policy meetings due Wed. and Thurs, respectively
- USD opens on a mixed note with JPY outperforming.
FX at a Glance
USDCAD open 1.4359, overnight range 1.4348-1.4402, close 1.4345
USDCAD gapped higher in Asia due to Trump’s reaction to Columbia not allowing the repatriation of illegal immigrants from Columbia. The broad array of tariffs and sanctions served as a warning to any country that thinks they can defy the will of Donald J Trump.
Canadian officials have to be worried. There are numerous reports of how Canada will respond to US tariffs which could begin on February 1. Even worse, internal Liberal party politics have seriously damaged Canada’s ability to negotiate.
The Bank of Canada is expected to cut rates by 25 bps to 3.0% on Wednesday but the forward guidance will be useless due to the risk of economy crushing tariffs that would begin Feb. 1.
WTI oil traded in a 73.67-75.13 range with prices trading defensively due to an easing of tensions in the Middle East and Trump’s energy policies.
USDCAD Technicals
The intraday USDCAD technicals are bullish above 1.4340 and looking for a break above 1.4410 to target 1.4450. A move below 1.4340 targets 1.4310 and then 1.4280.
USDCAD has been trading with a bullish bias with the uptrend channel intact since October. The base is at 1.4290 while the ceiling is 1.4685. The RSI is neutral.
For today, USDCAD support is 1.4340 and 1.4310. Resistance is 1.4410 and 1.4450.
Today’s Range: 1.4310-1.4410.
Chart: USDCAD daily
Trump Emboldened by Tariff Threat Results
Colombian President Gustavo Petro flexed his muscles and denied landing permission to two U.S. military transports returning illegal immigrants. President Trump was not happy, and before you could say “Tariff,” Colombia was hit with the following:
- Emergency 25% tariffs on all goods coming into the United States. In one week, the 25% tariffs will be raised to 50%.
- A Travel Ban and immediate visa revocations on Colombian government officials, their allies, and supporters.
- Visa Sanctions on all party members, family members, and supporters of the Colombian government. Enhanced Customs and Border Protection inspections of all Colombian nationals and cargo on national security grounds.
- IEEPA Treasury, Banking, and Financial Sanctions to be fully imposed.
Two hours later, President Petro changed his tune.
DeepSeek Deep Sixes Equities
Chinese AI company DeepSeek released an AI model that is far cheaper to operate and runs on older generation chips. Immediately, investors decided that perhaps Nvidia was a tad overvalued, and the stock shed 12% in premarket trading. That was enough to send European bourses tumbling, with the German DAX down 1.17% and S&P 500 futures losing 2.4% (as of 6:50 am). The U.S. 10-year Treasury yield is at 4.51%, down from 4.892%.
EURUSD
NY Open: 1.0506
Overnight Range: 1.0454-1.0503
EURUSD is getting a bit of a boost from better-than-expected German Ifo data. The Business Climate Index rose to 85.1 (previously 84.7), while current conditions ticked up to 86.1 from 85.1. Even so, companies remain very pessimistic about the future. Traders are more concerned about Thursday’s ECB decision.
GBPUSD
NY Open: 1.2495
Overnight Range: 1.2426-1.2515
Sterling is trading near the top of its overnight range in a rally exacerbated by stale short-sterling positions getting squeezed as gilt yields have started to fall.
USDJPY
NY Open: 154.01
Overnight Range: 153.72-156.25
USDJPY peaked in early Asian trading, then dropped on the back of safe-haven demand for yen and falling U.S. Treasury yields. Trump’s heavy-handed approach to Colombian diplomacy, combined with the lingering impact of Friday’s BoJ rate increase, weighed on the currency pair. The move below 155.70 snapped the December uptrend and suggests further losses to 151.00.
AUDUSD
NY Open: 0.6298
Overnight Range: 0.6278-0.6307
Australian markets were closed for Australian Day celebrations, and the reduction in liquidity contributed to AUDUSD gapping lower in Asia and erasing Friday’s gains. Increased risk aversion due to heightened tariff fears and lower equity prices fueled the losses.
NZDUSD
NY Open: 0.5697
Overnight Range: 0.5677-0.5703
New Zealand markets were closed for a holiday. Kiwi gapped lower in Asia due to increased negative risk sentiment after global equity markets came under selling pressure.
USDMXN
NY Open: 20.4887
Overnight Range: 20.2610-20.5624
USDMXN dropped on broad U.S. dollar weakness on Friday but gapped higher overnight due to renewed tariff tension. Trump’s tariff actions and other sanctions against Colombia drove USDMXN demand on fears that he could use the same tactic on Mexico. Mexico’s trade balance flipped from a deficit to a $2.56 billion surplus in December.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1698 vs exp. 7.2295 (prev. 7.1705)
Shanghai Shenzhen CSI 300 rose 0.41% to 3817.08
NBS January Manufacturing PMI 49.1 (forecast50.1, December 50.1)
Non-Manufacturing PMI 50.2, vs December 52.2
Chart: USDCNY
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