February 10, 2025

  • Trump to impose 25% tariffs on steel and aluminum imports today
  • Gold getting close to USD $3,000/oz
  • USD climbs on tariff talk.

 FX at a Glance

USDCAD open 1.4333, overnight range 1.4316-1.4381, close 1.4292

USDCAD had a lively overnight session. Prices spiked to the top of the overnight band in the initial reaction to Trump’s 25% steel and aluminum tariff broadside, as Canada is the biggest US supplier of those two items. The rally was unwound just as quickly, partially because “it’s the same old song and dance.”
Economists were elated with the latest domestic employment reports, seeing the data as evidence that the domestic economy has turned a corner.
However, the looming trade war popped their balloons. The BoC will need to keep lowering interest rates to compensate for an economic slowdown from the US and Canada trade war, and that should limit USDCAD downside. The spread between Canada and US 10-year yields is -140.5.
WTI oil prices are trading near the top of its 70.84-72.10 range. Gains may be limited due to OPEC’s intentions to begin increasing production in April and the risk of weaker demand from China.
There are no US and Canadian economic reports today.

USDCAD Technicals
The intraday USDCAD technicals are mildly bullish after bouncing off support at 1.4270 on Friday and spiking to 1.4381 overnight. However, the quick drop back to 1.4320 argues for more 1.4300-1.4400 consolidation.
Longer term, the USDCAD uptrend channel that began at the end of September remains intact while prices are above 1.4260. The top of the channel is at 1.4770, which suggests 1.4270-1.4700 will be the USDCAD range for the near term.
For today, USDCAD support is 1.4310 and 1.4270. Resistance is 1.4380 and 1.4420.

Today’s Range: 1.4290-1.4380

Chart: USDCAD daily    

Trump Tries to Upstage Super Bowl

President Trump was confused. He thought that Super Bowl LIX in New Orleans was another gathering to celebrate his election victory. Imagine his disappointment when he discovered that it was a football game and not another coronation. The media was only interested in how Chiefs quarterback Patrick Mahomes would lead his team to an unprecedented third consecutive title against a superior Philadelphia Eagles team. Nothing doing, thought Donnie. Then he announced a 25% tariff on all imports of aluminum and steel, on top of existing tariffs.

The news washed through financial markets like a tidal wave and Trump was once again the lead item on all newscasts and social media. Trump was so happy, he even took to his TruthSocial megaphone and blasted: “The only one that had a tougher night than the Kansas City Chiefs was Taylor Swift. She got BOOED out of the Stadium. MAGA is very unforgiving!”

Key Data and Powell on Tap this Week
Fed Chair Jerome Powell testifies before Congress on Tuesday, the first of two testimonies this week. This Q&A could be interesting, especially if the Democrats ask questions about how tariffs will impact interest rates. US CPI is due Wednesday and not likely to force the Fed to cut rates in March. The rise in global tensions has boosted safe-haven demand for gold, which is once again posting all-time highs.

Equities Shrug off Tariff News
News of Trump’s latest tariff announcements were partially responsible for the mixed Asian equity results. Japan’s Topix and Australia’s ASX 200 closed with modest losses (-0.15% and -0.34%, respectively), but Hong Kong’s Hang Seng rallied to close with a 1.84% gain. European bourses are all higher, led by a 0.51% rise in the UK FTSE, while S&P 500 futures are up 0.45%.

EURUSD

NY Open: 1.0330
Overnight Range: 1.0286-1.0335
EURUSD traders were unhappy with the tariff nonsense, which was just another negative to add to the single currency’s woes. Widening EUR and US interest rate differentials due to the outlook for more ECB rate cuts, while the Fed rate remains unchanged, also weighed on prices. EU officials are weighing their response to the US tariffs.

GBPUSD

NY Open: 1.2412
Overnight Range: 1.2371-1.2421
GBPUSD is consolidating Friday’s post-NFP losses and last week’s dovish Bank of England rate cut. However, the downside saw a bit of support from EURGBP selling, as the EU is thought to have more to lose from tariffs than the UK. GBPUSD is in a downtrend while prices are below 1.2500.

USDJPY

NY Open: 152.09
Overnight Range: 151.25-152.24
USDJPY rallied on the back of the tariff news and the lingering fallout from the relatively strong US nonfarm payrolls report. Initial optimism from comments by Prime Minister Ishiba suggesting that Japan could avoid the higher tariffs quickly dissipated.

AUDUSD

NY Open: 0.6280
Overnight Range: 0.6237-0.6284
AUDUSD took the Trump tariff news hard and gapped lower at the Asia open, but the move was fully reversed in short order. China’s retaliatory tariffs on US imports take effect today, and trade war concerns may limit AUDUSD gains.

NZDUSD

NY Open: 0.5658
Overnight Range: 0.5637-0.5664
NZDUSD recouped its losses from Friday’s resilient US employment data, but the prospect of steady US and lower New Zealand interest rates, along with escalating China/US trade war concerns, are weighing on the currency.

USDMXN

NY Open: 20.6328
Overnight Range: 20.5517-20.6386
The Mexican peso is under pressure due to tariffs and the lingering effect of last week’s Banxico interest rate cut to 9.50%.

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

China Snapshot

PBoC  fix: 7.1707 vs exp. 7.3050 (prev. 7.1699).

Shanghai Shenzhen CSI 300 rose 0.21% to 3901.06

Chinese CPI MM (Jan) 0.7% vs. Exp. 0.8% (Prev. 0.0%), CPI YY (Jan) 0.5% vs. Exp. 0.4% (Prev. 0.1% Chinese PPI YY (Jan) -2.3% vs. Exp. -2.1% (Prev. -2.3%)