– US data to take back seat to Trump’s pending inauguration.
– Canada Premiers draft retaliatory tariff plans
– USD traded quietly but opens on a mixed note.
USDCAD: open 1.4372, overnight range 1.4323-1.4392, close 1.4341, WTI $76.46, Gold, $2688.46
The Canadian dollar gave back all of yesterday’s gains and continues to drift lower in early NY trading. The pressure is stemming from Trump’s threat to put 25% tariffs on all imports from Canada. Alberta Premier Danielle Smith seems to be convinced that the threat will soon become a reality. Trump is inaugurated as the 47th President of the United States on Monday.
Canada’s provincial premiers are not taking the threat sitting down. (Actually, they were). Nine of 10 premiers, led by Ontario’s Doug Ford, signed a statement that promised “to continue to work together on a full range of measures to ensure a robust response to possible U.S. tariffs, including supports for sectors, businesses, and individuals.” Alberta Premier Danielle Smith did not sign or attend the meeting. She wrote that the Trudeau government “continues to publicly and privately float the idea of cutting off energy supply to the U.S. and imposing export tariffs on Alberta energy. Until these threats cease, Alberta will not be able to fully support the federal government’s plan in dealing with the threatened tariffs.”
A trade war will wreak economic havoc across both countries. However, the U.S. economy is far larger and more diversified, which means Canada will come out second best.
The U.S. economy released a significant volume of data today, including weekly jobless claims, the Philadelphia Fed index, retail sales, business inventories, and the NAHB Housing Market Index. While these figures are likely to cause some market volatility, the primary focus for traders remains on the upcoming inauguration.
EURUSD traded defensively in a 1.0259-1.0355 range. Traders are awaiting the release of key U.S. economic indicators. German inflation rose slightly in December, exceeding expectations but did not have any impact on FX markets.
GBPUSD dropped to 1.2190 from 1.2248 and is at the bottom of that band in NY trading. A series of weaker-than-expected UK economic data releases fueled the sell-off. November GDP growth was lower than anticipated, while manufacturing and industrial production both declined. Comments from Bank of England policymaker Alan Taylor advocating for further interest rate cuts due to the weakening economy further limited upside potential.
USDJPY traded in a 155.21-156.53 range. Prices fell in Asia, then rebounded in Europe, and USDJPY is at 1.56.14 in NY. Sentiment is negative on anticipation that the Bank of Japan will hike interest rates at its upcoming meeting on January 24. The 10-year Treasury yield declined slightly.
AUDUSD pair rallied from 0.6195 to 0.6247 following a stronger-than-expected employment report, with job growth exceeding forecasts. However, the details of the report were less positive, as full-time employment declined and the unemployment rate ticked higher. Prices have retraced the entire move.
Today’s U.S. data includes weekly jobless claims (forecast 210,000), Philadelphia Fed (forecast -5), Retail Sales (forecast 0.6%), along with Business Inventories and NAHB Housing Market Index.
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