- ECB expected to cut rates by 25 bps to 2.5% today
- US recession risks rise due to tariff fallout.
- USD opens consolidating recent losses and opens on the defensive.
USDCAD: open 1.4358, overnight range 1.4310-1.4362, close 1.4341, WTI 66.27, Gold 2898.83
The Canadian dollar is rather frothy due to the fluid status of US trade tariffs. The auto tariff component of the tariffs that went into effect on Tuesday were delayed until April, yesterday. The news knocked USDCAD down to 1.4330 from a peak of 1.4451 yesterday.
USDCAD rallied steadily form its Asian low and is probing resistance in the 1.4380 area in NY. There are around $1.69 billion of 1.4370-1.4400 option strikes maturing at 10:00 am NY which should ensure choppy trading if prices remain in the area.
WTI oil prices traded lower in a 66.16-66.90 range due to higher US crude inventories and Opec’s planned production increase. The US EIA reported a 3.61-million-barrel rise in US crude inventories for last week.
EURUSD traded with a bid in a 1.0781-1.0823 range. A nearly €1 trillion stimulus package fueled the rally from 1.0360 on Monday to today’s peak. The program is expected to drive economic growth across the EU, with additional defense spending measures from EU President Ursula von der Leyen possibly adding to the momentum. An ECB 25 bp rate cut to 2.5% is fully priced in, but forward guidance remains uncertain due to Trump’s tariff plans. Meanwhile, Eurozone Retail Sales posted a 1.5% y/y gain, falling short of the 1.9% forecast, though markets largely ignored the data.
GBPUSD traded in a 1.2866-1.2924 range, gaining traction after breaking above 1.2850 and triggering stop losses in a broad-based US dollar sell-off. However, concerns linger after the British Chamber of Commerce slashed its 2025 UK growth forecast to 0.9% y/y from 1.3%, citing mounting cost pressures from the UK budget and global trade uncertainty.
USDJPY traded defensively in a 147.70-149.33 range as expectations of a Bank of Japan rate hike gained momentum. Japan’s largest labor union's demand for a 6.1% wage increase in 2025 has strengthened the case for policy tightening. At the same time, Trump’s tariff plans have heightened US recession risks, which could force the Fed into an aggressive rate-cut cycle.
AUDUSD traded in a 0.6322-0.6357 range before pulling back from its overnight high as traders took profits amid a negative risk tone, with S&P 500 futures pointing lower. Australian data provided some support, with building permits rising 6.3% m/m in January (previous 1.7%) and the trade surplus expanding to 5.62 billion from 4.92 billion.
Today’s US economic data includes trade, weekly jobless claims, and wholesale inventories. Canada’s Merchandise Trade data is also due. However, the data will be largely ignored due to uncertainty around Trumps tariffs.
