February 29, 2025
- Surprise boost to Trump’s China tariffs turns risk sentiment negative.
- Canada GDP uninspiring-US Core-PCE as expected.
- USD opens with a bid and is consolidating gains in early trading.
FX at a Glance
USDCAD: open 1.4440, overnight range 1.4404-1.4453, close 1.4436
USDCAD soared on the back of Trump’s latest announcement that the 25% tariffs on non-energy and 10% tariffs on energy imports will go into effect on March 4. Politicians and businessmen are gobsmacked because the initial impact will be just as damaging to American workers as it will be for Canadians.
The Trump administration has proven that foreign governments cannot trust anything that America (not Americans) say or promise as the message will change at the whim of a 79 year old egomaniac.
Canadas GDP rose 2.6% y/y in Q4 2024 (forecast 1.9%) which looks great-but the details tell a different story. To start, sluggish per capita GDP suggests growth is failing to keep pace with population increases. Business investment remains weak. Household savings declined. And now, the looming trade war will make everything worse.
The Fed’s favourite inflation measure, Core Personal Consumption and Expenditures ioffered no surprises, rising 2.6% y/y as forecast.
USDCAD Technicals.
The USDCAD technicals are bullish following the break above resistance at 1.4370 which extend gains to the 1.4460 area. A topside break targets 1.4520 while a move below 1.4410 would extend losses to 1.4370.
The daily chart shows that the February uptrend line is intact above 1.4330 with a break above 1.4510 suggesting a straight shot to 1.4795. The MACD indicator has confirmed the bullish bias although RSI warns USDCAD is approaching “overbought” territory.
For today, USDCAD support is 1.4410 and 1.4370. Resistance is at 1.4470 and 1.4520
Today’s Range: 1.4410-1.4510.
Chart: USDCAD daily
The Outer Limits
“There is nothing wrong with your television set, YouTube Channel, or Social Media feed. We are controlling the transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We control the message. We can sharpen it to crystal clarity or make it a soft blur. For the next four years sit quietly, and we will control all that you see and hear. You are about to experience the awe and mystery which reaches from the inner mind to… The Donnie Dimension
The above was a version of the intro to the 1959 TV series Outer Limits, and it accurately describes the geopolitical and economic landscape today. Tariffs on, tariffs off. Tariffs up, tariffs down. Enemies are friends, friends are foes, and America is being Made Great Again.
Equities Plunge on Risk Aversion
The sound of a global trade war reverberated down Wall Street, and the major indexes closed with losses. Asian traders fled for the exits as well, with Australia’s ASX 200 dropping 1.16% and Japan’s Topix losing 1.98%. Hong Kong’s Hang Seng got crushed and lost 3.28%. European bourses opened negatively but have since bounced and are mixed. The UK FTSE 100 is up 0.29%, while the German DAX is down 0.27%. S&P 500 futures are up a tepid 0.20%, while safe-haven demand for Treasuries has lowered the 10-year Treasury yield to 4.25%.
EURUSD
NY Open: 1.0399, Overnight Range: 1.0381-1.0408
EURUSD got hammered after Trump said he would go ahead with reciprocal tariffs starting April 6, in addition to the tariffs imposed on Canada, Mexico, and China. Traders are still cautious around Trump’s plans for Ukraine and Russia. The tariff story usurped today’s Eurozone data. The EURUSD technicals are bearish and are looking for further losses to 1.0200.
GBPUSD
NY Open: 1.2593, Overnight Range: 1.2573-1.2611
UK Prime Minister Keir Starmer bent the knee to His Highness Donald J Trump. He came bearing gifts, or at least an invitation to an unprecedented second state visit from King Charles, who by now has probably forgiven Trump for his lust for Lady Diana. He may have stoked Trump’s ego, but whatever he thinks he accomplished is merely a fantasy. Why would Starmer get excited about a US/UK trade deal? History shows Trump deals are worthless. Biden may have been frail, confused, and slow, but Trump’s reality differs from the rest of the world.
USDJPY
NY Open: 150.38, Overnight Range: 149.10-150.69
USDJPY saw two-way action overnight. Trump’s tariff announcements triggered safe-haven demand for yen, and USDJPY dropped to its session low. However, softer-than-expected Tokyo inflation data (2.9% y/y vs. 3.4% in January) and higher Retail Sales numbers sparked a rally as the data would liven up the BoJ’s March rate decision. The USDJPY downtrend from the beginning of the year is intact while prices are below 152.60.
AUDUSD
NY Open: 0.6214, Overnight Range: 0.6209-0.6239
AUDUSD is feeling the heat from Trump’s tariffs on China and is the second-worst currency performer against the greenback since yesterday. The RBA cut interest rates earlier this month and are expected to repeat the move if inflation continues to head lower.
NZDUSD
NY Open: 0.5599, Overnight Range: 0.5597-0.5635
Trump’s tariff actions against China knocked Kiwi for a loop. NZDUSD is the worst-performing G-10 currency since yesterday’s open, and it is trading in NY at the bottom of its overnight range. The tariffs promise to further weaken the Chinese economy, which is also New Zealand’s largest export market. The RBNZ’s dovish monetary policy outlook is also weighing on prices.
USDMXN
NY Open: 20.4348, Overnight Range: 20.4134-20.5144
USDMXN spiked when Trump reiterated his plan to impose 25% tariffs on Mexican imports effective next Tuesday. The rally was not sustained, and USDMXN is trading at 20.4424, below yesterday’s close of 20.4897. USDMXN direction is at the mercy of the Banxico monetary policy outlook and tariffs.
BTCUSD
NY Open: 80,248, Overnight Range: 78,617-87,272
President Trump’s latest tariff salvo threatens to disrupt the global economy, and traders stampeded to bail out of risky assets. The riskiest of them, Bitcoin, was trashed. Since breaking below 93,000 on Monday, it has been on a one-way street lower. It has fallen more than 27% since it peaked just after Trump’s election victory. A move below 78,000 will extend losses to 72,000.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC fix: 7.1738 vs exp. 7.2873 (prev. 7.1740)
Shanghai Shenzhen CSI 300 fell 1.97% to 3890.05
Trump slaps 20% tariffs on all imports from China beginning March 4, balming China for America’s Fentanyl problem.
Sources: Yahoo Finance, Oanda, Investing.com,
