March 12, 2025
- US inflation core CPI rises 3.1% (forecast 3.2%, previous 3.3%)
- Bank of Canada poised to cut rates by 25 bps to 2.75%.
- USD trades lower after US CPI.
FX at a Glance
USDCAD: open 1.4436, overnight range 1.4369-1.4485, close 1.4436
USDCAD opened higher than yesterday’s opening but dropped sharply on the heels of a slightly weaker than expected US inflation report, which sank the US dollar across the board and boosted S&P 500 futures.
Traders are betting that today’s results could force the Fed to adopt a more dovish stance when it meets on March 19. However, the euphoria may not last as no one knows how Trumps tariffs will impact the US economy or inflation.
Ontario Premier Doug Ford’s aggressive move to impose a 25% surcharge on electricity exports to the US shocked American policymakers into reopening the Canada/US trade talks, which earned him an invite to Washington to discuss matters, slated for Thursday.
Not only that, the US backed away from its threat to hike tariffs on steel and aluminum to 50%. Mr. Trump described Doug Ford as a “gentleman” and a “strong man,” a far cry from his usual description of Canadian leaders.
Even so, it’s tariffs all around. The highly touted 25% tariffs on imports of steel and aluminum go into effect today. The federal government is reportedly announcing a dollar-for-dollar retaliation today.
Lost in the tariff noise is the Bank of Canada monetary policy decision. The BoC will cut rates by 25 bps to 2.75%, but the forward guidance is likely to be vague due to the uncertainty of the impact of tariffs. The rate cut is fully priced into the currency.
WTI oil prices are at the top of its 66.19-66.95 range but remain under pressure as the promise of a global trade war suggests weaker crude demand. Canada’s Minister of Energy and Natural Resources, Jonathan Wilkinson, another “save-the-planet” tree hugger, warned that Canada could impose export duties on energy, which would not go over very well in the US or Alberta. His comments have been largely ignored, but they do suggest that any version of the Liberal Party will continue killing Canada’s energy industry.
There are around $1.3 billion of 1.4375-80 option strikes rolling off at 10:00 am option expiry.
USDCAD Technicals
The short-term USDCAD technicals are bullish but upward momentum is fading. A break above 1.4480 will extend gains to 1.4550 while a break below 1.4380 suggests a retest of the 1.4310-40 support zone.
The medium-term outlook highlights uptrend line support at 1.4290 and resistance at 1.4540 however, the rejection of gains above 1.4550 suggest a retest of the 1.4340 area.
For today, USDCAD support is 1.4380 and 1.4340. Resistance is at 1.4480 and 1.4520.
Today’s Range: 1.4360-1.4460
Chart: USDCAD daily
Tit-for-Tat Tariff
It’s on! The global trade war kicked off in earnest today when the EU announced tariffs on US metals and another €26 billion of American products. China has already responded, but the UK and Australia have not. Both countries are hoping their meek and mild, somewhat subservient approach to Trump will help them in the long run. It won’t work.
Beware the CPI of March
US February CPI rose less than expected. Headline CPI rose 0.2% m/m (forecast 0.3%) and 2.8% y/y (forecast 2.9%). Core CPI rose 3.1% compared to 3.3% in January which raised hopes for a dovish Fed outlook. However, the results were pre-tariff and it will take more evidence to move policymakers off the sidelines.
Cease Fire
Ukraine and the US reached a 30-day ceasefire deal, which is a feather in the cap for the negotiators. However, since Ukraine and the US were not shooting at each other to start with, it is really an agreement to attempt a ceasefire agreement with the party actually shooting at Ukraine, and so far, Russia is not saying anything.
EURUSD
NY Open: 1.0911, Overnight Range: 1.0888-1.0926
EURUSD traders have shrugged off the onset of the US/EU trade war, leaving the currency adrift inside yesterday’s range. The single currency remains bid due to the divergent views of the EU and American economies. For the first time in ages, EU growth is expected to outperform America due to the increased odds of an end to the Russia/Ukraine war and the massive defense stimulus plans proposed by Germany and the EU. ECB President Christine Lagarde warned that trade shocks risk raising inflation volatility, which will prevent the ECB from signaling policy intent.
GBPUSD
NY Open: 1.2936, Overnight Range: 1.2914-1.2956
GBPUSD remained rangebound in an uneventful session, with traders sidelined ahead of the US inflation data. GBPUSD direction is at the mercy of broad US dollar sentiment.
USDJPY
NY Open: 148.62, Overnight Range: 147.68-148.67
USDJPY extended this week’s gains after February PPI data was a touch softer than in January (actual 0% m/m vs. January 0.3%) but better than the forecast of a -0.1% decline. The results were “meh” but will not prevent the BoJ from raising rates. The overnight gains were mainly due to profit-taking ahead of the US inflation numbers.
AUDUSD
NY Open: 0.6288, Overnight Range: 0.6277-0.6301
AUDUSD opened in NY little changed from yesterday, but it has a negative bias due to Trump’s tariffs on Australia and China.
NZDUSD
NY Open: 0.5708, Overnight Range: 0.5698-0.5720
NZDUSD opened unchanged from yesterday and, like the Aussie, is trading with a bearish bias due to the new tariff regime.
USDMXN
NY Open: 20.2404, Overnight Range: 20.2248-20.3079
USDMXN is trading with a modest bearish bias after the US/Canada trade tensions de-escalated and the electricity tariffs were suspended. Traders are awaiting the US inflation data to provide direction.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1696 vs exp. 7.2324 (Prev. 7.1741)
Shanghai Shenzhen CSI 300 fell 0.36% to 3927.23
Sources: Yahoo Finance, Oanda, Investing.com,
