January 29, 2025
- Asia markets on holiday
- BoC and FOMC decisions today.
- USD trades sideways in dull overnight session
FX at a Glance
USDCAD open 1.4429, overnight range 1.4392-1.4452, close 1.4402
The Bank of Canada will cut rates by 25 bps today. BoC officials and recent data suggest it is a certainty thanks to tepid growth, rising unemployment and tame inflation. However, the future outlook is as clear as mud.
Policymakers will be reluctant to provide much in the way of forward guidance due to the prospect of Trump slapping tariffs on Canadian imports to the US starting February 1. Yesterday, White House press secretary Karoline Leavitt said Trump plans to hit Canada with tariffs on Saturday.
USDCAD will remain bid ahead of the FOMC meeting this afternoon. The Fed will leave rates unchanged and although both the FOMC and BoC outcomes are expected, the widening interest rate differentials will limit USDCAD downside.
There is a $1.4 billion, 1.4500 strike rolling off at 10:00 am.
USDCAD Technicals
The intraday USDCAD technicals are bullish above 1.4380 and looking for a break above 1.4460 to target 1.4500. then 1.4550. A move below 1.4380 targets 1.4340.
The longer term technicals are bullish while trading above 1.4310 and looking for a break above 1.4520 to kick off the next leg of the rally with a target of 1.5000.
For today, USDCAD support is 1.4380 and 1.4340. Resistance is 1.4460 and 1.4500
Today’s Range: 1.4410-1.4510
Chart: USDCAD daily
The World is Dancing to Trump’s Tune.
There has never been a U.S. President like Donald J. Trump. He has no filter and spouts off about anything that pops into his mind. Diplomacy is irrelevant. So are facts. But what is even more dangerous is that he is surrounded by a cabal of successful people, many of them multi-billionaires, who kowtow to his every whim and fantasy. “Yes, sir, my President, whatever you desire.”
Scores of economists have pointed out that Trump’s tariff program is detrimental to the U.S. economy. It would drive up prices as trading partners retaliate, disrupt supply chains, and increase unemployment.
It doesn’t matter. Trump believes himself to be the all-knowing Master of the Universe It doesn’t matter. Trump believes himself to be the all-knowing Master of the Universe and many world governments are scrambling to adapt to Trump’s New World Order
Equity Traders Awaiting Big Tech Earnings
The equity debacle sparked by China’s DeepSeek will be front and center when Microsoft, Meta, and Tesla report quarterly earnings today. Analysts warn that soft earnings could be blamed on AI research and development and spark another sell-off.
Asian markets were mostly closed due to Lunar New Year holidays. Australia’s ASX 200 closed with a 0.57% gain, helped by falling inflation numbers, while Japan’s Topix rose 0.60%. European bourses are in positive territory, led by a 0.82% rise in the German DAX due to strong earnings reports. S&P 500 futures are up a tepid 0.11%, and the U.S. 10-year Treasury yield is 4.52%.
EURUSD
NY Open: 1.0404
Overnight Range: 1.0394-1.0444
EURUSD is sliding under pressure from multiple headwinds, including the threat of U.S. tariffs, a dovish tilt from the ECB ahead of tomorrow’s policy meeting, and the looming Fed decision to keep rates unchanged. Sweden’s Riksbank cut rates by 25 bps to 2.25%, as expected, but hinted that it could be the last rate cut for this cycle.
GBPUSD
NY Open: 1.2417
Overnight Range: 1.2417-1.2464
Sterling is climbing off its session low ahead of two key events. The first is a speech by Chancellor Rachel Reeves, where she is expected to provide details of her plan to boost the UK economy, which may include increased infrastructure spending. The other event is the FOMC rate decision.
USDJPY
NY Open: 155.39
Overnight Range: 155.00-155.79
USDJPY was steady ahead of the FOMC meeting. Prices are torn between buying yen due to the risk of more BoJ rate hikes, while lingering intervention fears limit gains. The minutes from the December 19 BoJ meeting did not provide any new insight. Members are starting to believe that inflation could rise but will study incoming data.
AUDUSD
NY Open: 0.6228
Overnight Range: 0.6223-0.6256
AUDUSD fell steadily overnight, albeit in a narrow range, after December inflation data came in lower than expected. The RBA trimmed mean rose 3.2% y/y in Q4 (forecast 3.3%, previous 3.6%), while CPI headline inflation rose 2.4% y/y compared to 2.8% in November. The results led Westpac Bank to join CBA and ANZ in calling for a 25 bp rate cut on February 18.
NZDUSD
NY Open: 0.5648
Overnight Range: 0.5644-0.5669
NZDUSD drifted lower, weighed down by the prospect of Trump’s “universal tariffs” and caution ahead of today’s FOMC meeting. Furthermore, ongoing concerns about a dovish shift by the RBNZ at the next monetary policy meeting on February 19 are limiting gains.
USDMXN
NY Open: 20.5279
Overnight Range: 20.4767-20.5730
USDMXN is trading with a modest bid ahead of today’s FOMC meeting and on fears that Trump will follow through on tariffs on goods imported from Mexico beginning February 1. USDMXN did not react to news that Mexico’s unemployment rate fell 2 ticks to 2.4% in December.
BTCUSD (Bitcoin)
NY Open: 102,560
Overnight Range: 100,380-103,850
Bitcoin consolidated yesterday’s gains in a quiet session. Prices garnered a bit of support following news that the Czech central bank was considering adding BTCUSD to its reserves.
FX high, low, open (as of 6:00 am ET)
China Snapshot
Closed Lunar New Years
PBoC Fix: 7.1698 (prev. 7.1705) as of January 27, 2025
Shanghai Shenzhen CSI 300 rose 0.41% to 3817.08-close January 27
Chart: USDCNY
Sources: Investing.com Oanda
