- Loonie consolidates gains following Trump’s Davos speech.
- Trump tells Opec to lower prices.
- USD falls sharply on improved risk sentiment.
USDCAD: open 1.4328, overnight range 1.4315-1.4384, close 1.4385, WTI $75.05, Gold, $2776.05
The Canadian dollar rallied alongside the other major G-10 currencies after President Trump toned down remarks about new trade tariffs for China. The dollar selling was fast and furious because long US dollar positions were a tad stretched. Trump has a penchant for contradicting himself, and his “go-to” response to everything is tariffs.
Canada is not out of the woods tariff-wise. Trump may have toned down his remarks about China, but that wasn’t the case for Canada. We got special attention in his Davos speech: “We’re going to be demanding respect from other nations ... Canada has been very tough to deal with over the years. We don’t need them to make our cars, and they make a lot of them. We don’t need their lumber because we have our own forests. We don’t need their oil and gas; we have more than anybody.”
Those remarks will limit Canadian dollar gains.
WTI oil prices traded softer in a 74.00-75.11 band after Mr. Trump said he would ask OPEC to bring down the price of oil because the high prices are supporting Russia’s war with Ukraine.
EURUSD traded in a 1.0412-1.0515 range after Trump hinted that he may not follow through on threats to impose more tariffs on China. Prices were also supported by stronger-than-expected Eurozone manufacturing PMI, which rose to 46.1 from December's 45.1.
GBPUSD rallied hard, rising from 1.2349 to 1.2448, after getting an added lift from better-than-expected flash PMI data in an environment of broad US dollar selling pressure. Even so, analysts suggest that the PMI data reflects continued challenges for the UK economy, highlighting job cuts and persistent inflation pressures.
USDJPY churned in a 154.85-156.40 range thanks to inflation figures, PMI data, and the Bank of Japan’s monetary policy decision. As expected, the BoJ raised its benchmark interest rate by 25 bps to 0.5%, the highest level in 17 years. Policymakers expressed confidence that rising wages would support inflation. Manufacturing PMI fell from 49.6 to 48.8, but Services PMI improved to 52.7 from 50.9.
AUDUSD extended its recent rally in a 0.6279-0.6331 range after President Trump indicated he did not want to use tariffs on China, in comments to delegates at the World Economic Forum. His remarks ignited a wave of US dollar selling, and AUDUSD joined the party. Upbeat PMI data also supported AUDUSD, with S&P Global noting rising services activity and stabilizing manufacturing output.
US Michigan Consumer Confidence Sentiment data is on tap, but it is Trump, not data, that is moving markets.
