January 21, 2025
- Trump era begins with a blizzard of executive orders.
- Trump says Canada tariffs may begin February 1
- USD opens modestly lower
FX at a Glance
USDCAD open 1.4436, overnight range 1.4290-1.4510, close 1.4309
Sometimes you are the windshield, sometimes you are the bug. Yesterday is a case in point. I believed that Trump would levy a 25% tariff on imports from Canada, and that would boost USDCAD to the 1.4550 area. Alas, he didn’t say anything about Canadian tariffs, and USDCAD plummeted from 1.4470 to 1.4263 in a heartbeat, triggering stop-loss selling en route.
That changed late yesterday afternoon. Trump responded to a question about tariffs and said, “We’re thinking in terms of 25% on Mexico and Canada, because they’re allowing vast numbers of people across the border. I think we’ll do it Feb. 1.” USDCAD spiked from 1.4290 to 1.4515 in the thin Asia market and is consolidating the gains in the 1.4450 area today.
Canadian inflation is cooling. Headline CPI rose 1.8% y/y in December and prices fell 0.5% m/m. The result should encourage the BoC to cut rates next Wednesday.
USDCAD Technicals
The intraday USDCAD outlook is bullish while trading above 1.4390 and looking for a sustained break above 1.4510 to extend gains to 1.4550. A move below 1.4390 suggests a drop to 1.4440.
The USDCAD uptrend that began in October survived another test yesterday, and the subsequent rebound suggests further gains are likely.
For today, USDCAD support is 1.4410 and 1.4370. Resistance is 1.4480 and 1.4520.
Today’s Range: 1.4430-1.4510
Chart: USDCAD daily
“I’m Back in the Saddle Again”
Donald Trump returned to the White House in a blizzard of executive orders. He rescinded 78 of Biden’s executive orders, including the controversial diversity, equity, and inclusion law, and declared that there are only two sexes, male and female. No longer can Americans identify as a bunny rabbit, nor can male criminals declare they are women to get incarcerated in a women’s prison. Effective yesterday, all federal hiring programs will be merit-based. Trump also withdrew from the Paris Climate Agreement. There are a whole lot more, but suffice it to say, woke has been put to sleep.
Equity Traders are Smiling
Trump’s failure to speak of tariffs on China, Mexico, or Canada gave equity traders hope. Asian indexes closed with modest gains. Australia’s ASX rose 0.66%, while Japan’s Topix was flat. Hong Kong’s Hang Seng index gained 0.91%. European bourses are flat. U.S. traders return from a long weekend with 43 S&P 500 companies reporting, including Netflix. S&P 500 futures are up 0.42%. The U.S. 10-year Treasury yield traded in a 4.534-4.59% range and is near the top in New York.
EURUSD
NY open: 1.0354
Overnight range: 1.0342-1.0435
EURUSD churned overnight as traders digested Trump’s executive orders, soundbites from Davos, and dovish comments by ECB officials. Trump signed an executive order that declared the OECD Global Tax Deal has no force or effect in the U.S. It seems to put the EU on notice that America will not tolerate the EU’s penchant for targeting American companies (e.g., Google, Microsoft) and levying massive fines. The German ZEW Survey showed investor morale falling to 10.3 from 15.7.
GBPUSD
NY open: 1.2250
Overnight range: 1.2235-1.2346
Sterling bounced erratically due to a mix of Trump’s comments and somewhat mixed UK employment data that could temper the BoE’s enthusiasm for a rate cut.
USDJPY
NY open: 155.98
Overnight range: 154.77-156.24
It has been a wild 24 hours for the Japanese yen, with prices bouncing around due to the belief that the Bank of Japan will hike rates by 25 bp on Friday. However, prices have bounced from the low and are near the session peak.
AUDUSD
NY open: 0.6223
Overnight range: 0.6209-0.6289
Aussie bounced up and down like an intoxicated kangaroo and is trading near the bottom of its overnight range. The rally was partially due to Trump failing to talk about tariffs in his inaugural speech, but those gains faded when he changed his tune last night.
NZDUSD
NY open: 0.5626
Overnight range: 0.5622-0.5689
Kiwi mirrored Aussie moves, and even better-than-expected electronic card retail sales data (actual 2.0% vs. previous 0.1%) failed to inspire much demand. The focus is on U.S.-centric developments.
USDMXN
NY open: 20.7501
Overnight range: 20.4803-20.8022
USDMXN dropped after Trump failed to mention tariffs in his inaugural speech, then spiked to the top of its overnight range after he suggested tariffs on Mexican imports could begin on February 1. Mexican Retail Sales fell 0.1% m/m in November and were -1.9% y/y.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1703 vs exp. 7.2888 (prev. 7.1886)
Shanghai Shenzhen CSI 300 rose 0.08% to 3832.61
Chinese stocks inched higher after Donald Trump failed to mention anything about tariffs on China in his speech.
Chart: USDCNY
