- Canadian dollar awaiting BoC and tariffs.
- Risk aversion rises on tariffs and AI
- USD trading with mixed bias
USDCAD: open 1.4359, overnight range 1.4340-1.4402, close 1.4345, WTI $74.69, Gold, $2767.39
The Canadian dollar traded sideways in a somewhat choppy market as holidays in Australia and New Zealand reduced FX liquidity.
Traders are looking ahead to the Bank of Canada monetary policy meeting on Wednesday, A 25 bps rate cut is fully priced in but the forward guidance could be disconcerting. President Trump has promised to levy 25% tariffs on imports of Canadian goods beginning on Saturday. Governor Tiff Macklem may warn that inflationary risks arising from the higher prices could lead to a rate increase, down the road.
The Feb 1 tariffs are more of a certainty after the results of the Trump Columbia spat on the weekend. Columbian officials refused permission to land to a US military jet bring illegal immigrants back home. When Trump heard the news he slapped an immediate 25% tariff on imports from Columbia, revoked visa and banned travel on Columbian officials and placed visa sanctions on government officials and their families.
Columbia President Petro quickly granted permission for the repatriation flights to continue.
Chinese AI firm DeepSeek introduced an AI model that questioned Nvidia’s valuation, leading to a 12% drop in its stock during premarket trading. This decline rippled across European markets, with the German DAX falling by 1.17%, while S&P 500 futures slid 2.4% as of 6:50 a.m. The yield on the U.S. 10-year Treasury note dropped to 4.51%, down from 4.892%.
EURUSD is trading in a 1.0454-1.0503 band. The euro gained some support from better-than-expected German Ifo data. The Business Climate Index rose to 85.1 from 84.7, while current conditions improved to 86.1 from 85.1. Despite these numbers, businesses remain deeply pessimistic about the future. Market participants, however, are more focused on the upcoming ECB decision on Thursday.
GBPUSD climbed in a 1.2426-1.2515 range. The British pound is trading near the upper end of its overnight band, supported by a rally that forced a squeeze on short-sterling positions. Falling gilt yields added to the upward momentum for the currency.
USDJPY dropped to 153.72 from 156.25 due to demand for safe-haven assets and a decline in U.S. Treasury yields. The combination of Trump’s aggressive stance on Colombian diplomacy and the lingering impact of Friday’s BoJ rate hike weighed on the pair.
AUDUSD 0.6278-0.6307. With Australian markets closed for Australian Day, reduced liquidity contributed to a gap lower in AUDUSD during Asian trading, erasing Friday’s gains. Heightened tariff concerns and falling equity markets further pressured the Australian dollar.
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