March 21, 2025
- Canadian retail sales fall more than expected.
- BoC Governor reiterates it has no weapons to defend against Trump tariffs
- USD climbs marginally except against commodity currency bloc
FX at a Glance
USDCAD: open 1.4337, overnight range 1.4314-1.4356, close 1.4325
USDCAD rallied yesterday morning in the wake of data showing the resilience of the US economy, but those gains were reversed by the end of the day due to rising commodity prices.
BoC Governor Tiff Macklem’s speech did not have anything to do with the USDCAD retreat—in fact, it should have fueled gains. What it did do was remind Canadians and investors that the Bank of Canada has no weapons with which to fight a trade war.
Mr. Macklem said, “Monetary policy cannot offset the effects of a trade war. What it can—and must—do is ensure that higher prices from a trade conflict do not become ongoing inflation. We are committed to maintaining price stability over time. There should be no uncertainty about that.”
Arguably, that means rising odds of rate increases if tariffs result in higher prices.
Headline Canadian Retail Sales fell 0.6% more than the -0.4% m/m expected while retail sales-ex-auto rose 0.2%, beating the estimate (-0.2% m/m) but well below the 2.0% seen in January. Stats Canada estimates that retail sales fell 0.4% in February. Nevertheless, Trumps tariffs are the focus
WTI is consolidating gains made since Tuesday in a 67.88-68.65 range, supported by Trump’s latest sanctions on Iran. These sanctions also took aim at a Chinese refiner and tankers supplying it with crude. China does not recognize US sanctions, calling them “illegal and unjustifiable unilateral actions.”
The US economic calendar is empty, but as this is the third Friday of March, the quarterly “witching hour” occurs, and with $4.5 trillion of stock, index, and single-stock options expiring, there is plenty of room for increased equity volatility, which could spill over into FX.
USDCAD downside could get messy around 10:00 am as $5.0 billion of option strikes in the 1.4280-00 area expire.
USDCAD
The short-term USDCAD technicals are neutral while prices consolidate this week’s gains but maintain a bullish bias with the uptrend line from September still intact. A break above 1.4350 will target 1.4380, then 1.4420. A decisive break below the 1.4300-10 area suggests further losses to the 1.4250-80 zone.
The medium-term outlook remains bullish while prices are above 1.4280. However, a downside break targets 1.4250 then 1.4210.
For today, USDCAD support is 1.4305 and 1.4270. Resistance is at 1.4360 and 1.4420.
Today’s Range: 1.4310-1.4410.
Chart: USDCAD 1 day
Tariff Fears Boosting Greenback
The US dollar is trading with a modest bid in NY and in demand due to renewed concerns about the impact of Trump’s tariffs on the global economy. The rally following Fed Chair Powell’s cautious outlook, combined with projections for two rate cuts in 2025, faded quickly due to the concerns about the negative impact of tariffs on the global economy and US corporate earnings.
Equities Sink
Wall Street closed in the red, and Asian equity indexes closed on a mixed note. Australia’s ASX 200 gained 0.16%, partly because of firmer commodity prices, while Japan’s Topix rose 0.29%. Hong Kong’s Hang Seng got hammered, losing 2.19%. A 0.71% drop in Germany’s DAX index is leading European bourses lower, while S&P 500 futures are down 0.99%. The US 10-year Treasury yield is 4.20%, and gold (XAUUSD) sits at 3034.62 (as of 8:30am ET.
EURUSD
NY Open: 1.0828, Overnight Range: 1.0820-1.0859
EURUSD continues to trade defensively after peaking at 1.0955 on Tuesday, and even today’s news that Germany’s upper house of parliament passed the €500 billion infrastructure and defense spending bill hasn’t helped. The intraday technicals are bearish while prices are below 1.0880.
GBPUSD
NY Open: 1.2936, Overnight Range: 1.2923-1.2973
GBPUSD is suffering a similar fate as the Euro, having erased all of its gains for the week. Traders ignored a slight improvement in UK consumer confidence (actual -19, previous -20), with attention on next week’s UK budget. Traders were also distracted by the closure of Heathrow Airport due to a fire, which may have upset many weekend travel plans.
USDJPY
NY Open: 148.71, Overnight Range: 148.59-149.66
USDJPY firmed after National CPI rose 3.7% y/y, a tad lower than the 4.0% seen in January. The results support BoJ Governor Ueda’s cautious approach to raising interest rates. In addition, CPI, ex-fresh food, rose just 3.0% compared to 2.9%, which was expected. Broad-based US dollar demand also underpinned prices. However, USDJPY has drifted down to 149.19 in NY.
AUDUSD
NY Open: 0.6287, Overnight Range: 0.6284-0.6307
AUDUSD consolidated yesterday’s losses and opened in NY near the bottom of its range. Broad US dollar strength, Trump tariffs, and China growth concerns weighed on prices.
NZDUSD
NY Open: 0.5755, Overnight Range: 0.5747-0.5766
NZDUSD traded narrowly in an uneventful session, with expectations for further RBNZ rate cuts keeping prices on the defensive.
USDMXN
NY Open: 20.2030, Overnight Range: 20.1345-20.2086
USDMXN rallied to 20.2703 yesterday following disappointing private spending data. The intraday uptrend is intact while prices are above 20.1600.
FX high, low, open (as of 6:00 am ET)
China Snapshot`
PBoC fix: 7.1760 vs exp. 7.2423 (Prev. 7.1754).
Shanghai Shenzhen CSI 300 fell 1.52% to 3914.7
Sources: Yahoo Finance, Oanda, Investing.com,
