– Canada looks ill-equipped to deal with Trump’s tariffs
– China’s 2024 growth tops estimates
– USD traded quietly overnight but is grind higher in NY
USDCAD: open 1.4411, overnight range 1.4389-1.4441 close 1.4394, WTI $78.19, Gold, $2704.23
The Canadian Dollar is facing significant headwinds thanks to the threat of increased tariffs on Canadian goods imported by the United States. The domestic economy is already flirting with a recession and a 25% tariff would ensure a deep and prolonged period of economic malaise.
Furthermore, the upcoming Liberal leadership race adds to the uncertainty. Mark Carney, former Governor of both the Bank of Canada and Bank of England joined the leadership race yesterday. Former Finance Minister Chrystia Freeland has confirmed she is running.
Traders have positioned themselves in anticipation of the Trump inauguration on Monday, leaving little incentive for market activity today. While China’s reported GDP growth rate of 5.4% surpassed expectations, its credibility remains questionable and failed to generate significant market excitement. Equities, however, are driving activity higher.
European stocks are broadly up, led by a 1.24% surge in the UK’s FTSE 100. S&P 500 futures have gained 0.32%, while the yield on the US 10-year Treasury has dipped by four bps to 4.57%.
EURUSD opened in New York at 1.0303 after trading in a range of 1.0278-1.0310 overnight. The pair is largely stagnant, with headline Eurozone inflation remaining at 2.7% year-over-year in December, unchanged from October. Similarly, Core-CPI held steady at 2.4%.
GBPUSD started the New York session at 1.2199, following an overnight range of 1.2161-1.2245. Sterling was under pressure even before the release of December’s retail sales data, which, despite exceeding November’s performance, failed to shift market sentiment. Retail sales rose 3.6% year-over-year (forecast 4.2%, previous 0). A dovish outlook for the Bank of England and concerns about Trump’s policies continue to weigh on the currency.
USDJPY opened in New York at 155.78 after an overnight range of 154.98-158.95. The pair dropped during Asian trading but rebounded in Europe, with its movements reflecting broader US dollar sentiment. Lower US Treasury yields and expectations of a Bank of Japan rate hike are pressuring the currency, though uncertainty surrounding Trump remains a wildcard.
AUDUSD entered the New York session at 0.6202, trading within a narrow overnight range of 0.6195-0.6220. The currency remains confined to yesterday’s trading levels and failed to maintain gains from China’s above-target GDP data, as uncertainty over the incoming US administration tempers enthusiasm.
Today’s US data includes building permits, housing starts capacity utilization and industrial production.
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