March 20, 2025
- Trump angered because Fed did not cut rates
- SNB cuts rates-BoE leaves them unchanged.
- USD rallies as FOMC less dovish than expected.
FX at a Glance
USDCAD: open 1.4375, overnight range 1.4315-1.4377, close 1.4326
Happy Days! Spring arrived at 5:02 am-Tariff free.
Trading USDCAD is like running through a minefield, as a Trump tweet, a Canadian political headline, or even geopolitical news can blow up the most carefully planned strategy.
USDCAD rallied after the FOMC decision and Powell’s press conference were not as dovish as anticipated. The Fed is comfortable with the status quo, while the likely implication of US reciprocal tariffs on April 2 suggests the BoC may need to cut rates to support the economy.
USDCAD is also underpinned because China slapped $3.7 billion of tariffs on imports of Canadian agricultural and food products, consisting of a 100% tariff on canola oil, oil cakes, and peas. The move is in response to Canada slapping tariffs on Chinese EVs last year.
Bank of Canada Governor Tiff Macklem will talk about “Tariff Uncertainty and Monetary Policy” in a speech in Winnipeg at 13:05 ET.
US data jobless claims rise by 2,000 to 223,000 but the news was a non-event as the forecast was for 224,000. The Philadelphia Fed manufacturing survey, rose 12.5%, more than expected but below the 18.1% seen previously.
The Canadian Industrial Product Price Index rose 0.4% (previous result revised down to 1.4%) and the Raw Material Price Index rose 0.3% compared to 3.5% in January. USDCAD traders did not care.
USDCAD
The short-term USDCAD technicals are bullish supported by the uptrend line from February 20 (4 hr chart) that comes into play at 1.4280. The break above 1.4350 overnight targets 1.4460.
The longer-term outlook is bullish with a decisive break above 1.4400 targeting the 1.4550-1.4570 area, However, the momentum indicators are neutral which implies further range trading.
For today, USDCAD support is 1.4320 and 1.4270. Resistance is at 1.4410 and 1.4450.
Today’s Range: 1.4330-1.4420.
Chart: USDCAD 1 day
Trump and Fed Disagree on Rates
The Fed left its benchmark rate unchanged and painted a picture of weaker growth and higher inflation. But it was when he dusted off his Thesaurus and suggested that inflation gains from tariffs would be transitory, that boosted Wall Street stocks into the close. However, the statement noted that “uncertainty around the outlook has increased.”
President Trump disagreed with the Fed’s actions tweeting, “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing. April 2nd is Liberation Day in America!!!”
Trump sounds like he is getting economic advice from Turkey President Recep Erdogan. In August 2022 Erdogan insisted that the Central bank cut rates because he believed lower rates curbed inflation. It didn’t. By October 2022, inflation had hit 85.5%.
Global Equity Indexes Unimpressed with Fed Hold
Wall Street closed with gains after Fed Chair Jerome Powell was rather ambivalent on how tariffs would impact inflation and interest rate direction. Wall Street closed with gains but Asian indexes were mixed. Australia’s ASX 200 rose by 1.16% while Hong Kong’s Hang Seng index lost 2.23%. Japanese markets were closed for the Vernal Equinox.
European bourses are in the red led by a 1.10% drop in the German Dax and a 0.69% fall in the French CAC 40. S&P 500 futures are flat and the US 10-year Treasury yield is 4.22%. Risk aversion sentiment powered gold (XAUUSD) to an overnight peak of 3057.36.
EURUSD
NY Open: 1.0852 Overnight Range: 1.0839-1.0913
EURUSD is trading with a slight negative bias following the FOMC decision and Powell’s press conference. The Summary of Economic Projections still has two rate cuts penciled in for 2025, unchanged from December but has weaker growth and higher inflation. That was enough to convince traders that the greenback would remain underpinned. The Swiss National Bank cut rates by 25 bp rate to 0.25%.
GBPUSD
NY Open: 1.2954 Overnight Range: 1.2946-1.3015
GBPUSD traded lower due to broad US dollar strength and because of caution ahead of the BoE monetary policy meeting. The BoE didn’t surprise anyone when they left rates unchanged. Once again, it was not a unanimous decision—Swati Dhingra voted for a quarter point cut but this time Catherine Mann didn’t join her. Trump’s tariffs played a role with the statement noting that “global trade policy uncertainty has intensified.”
USDJPY
NY Open: 148.71 Overnight Range: 148.18-148.88
USDJPY dropped from 150.13 pre-FOMC to 148.18 overnight thanks to what many believe was a diminished risk of rate hikes, which boosted stocks and knocked 10-year US Treasury yield down to 4.211% today, from a pre-FOMC level of 4.32%. Trading volumes were lighter than usual because Japanese markets were closed for the Vernal Equinox.
AUDUSD
NY Open: 0.6294 Overnight Range: 0.6283-0.6364
AUDUSD got spanked after the less dovish than expected FOMC outcome and a sharply weaker than expected employment report. Australia lost 52,800 jobs in February and the January number was revised down by 13,500 to 30,500. However, the Australian Bureau of Statistics says the labour market remains tight.
NZDUSD
NY Open: 0.5746 Overnight Range: 0.5744-0.5828
NZDUSD dropped despite a better-than-expected Q4 GDP report. Growth rose 0.7% which was better than the RBNZ forecast but it was not enough to change the outlook for at least two more rate cuts in 2025.
USDMXN
NY Open: 20.1424 Overnight Range: 20.0262-20.1548
USDMXN rallied partly because the FOMC was not as dovish as hoped and due to ongoing tariff concerns. Furthermore, Banxico is still expected to cut rates by 25 bps at the March 27 meeting.
FX high, low, open (as of 6:00 am ET)
China Snapshot`
PBoC fix: 7.1754 vs exp. 7.2402 (Prev. 7.1697).
Shanghai Shenzhen CSI 300 fell -0.88% to 3974.99
PboC leaves 1y and 5 y Loan Prime Rates (LPR) unchanged at 3.10% and 3.60% as expected.
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