– Markets rally when Trump blinks
– US March CPI ex-food and energy expected at 3.0% y/y-February 3.1%
– US dollar sinks like a rock except against CHF and JPY
USDCAD: open 1.4072, overnight range 1.4050-1.4111, close 1.4084, WTI 60.75, Gold 3116.22
The Canadian soared yesterday and then extended the rally overnight after Trump hit the pause button just a few hours after his tariffs came into effect. The administration got spooked after markets bled over $10 trillion in value and recession alarms blared. He delayed the program for 90 days. However, he left the reciprocal tariffs in place but lowered the levy to 10%.
The Canadian dollar rally may be overdone, as nothing has changed. Tariffs on Canadian steel, aluminum, lumber, oil, and potash remain fully intact, and Ottawa’s 25% duty on US auto imports hasn’t gone anywhere. Sooner or later, that’ll register with the Trump administration, and then things could turn ugly.
Today’s US CPI print is expected to rise 0.3% m/m (vs. February’s 0.2%), while core CPI is forecast to ease slightly to 3.0% y/y from 3.1%. Still, the data is unlikely to sway markets. The Fed is firmly in “wait and see” mode, and attention remains squarely on equities and tariffs.
Crude oil was whipsawed in the chaos, surging from $55.23 to $63.34 before sliding back to $60.90 in early New York trade.
EURUSD traded in a 1.0943–1.1065 range overnight, holding on to most of its recent gains as the greenback came under pressure following Trump’s tariff reversal. EURUSD found additional support from reports that a coalition government has been formed between Friedrich Merz’s Conservatives and the SPD.
GBPUSD rose in a 1.2810–1.2894 band and sits near the top as broad US dollar weakness continues to fuel demand. The UK wasn’t significantly impacted by the tariffs, which were limited to 10%, so the reversal has little direct effect. Still, sentiment is lifting all boats.
USDJPY traded with a negative bias and dropped from 147.92 to 145.96–147.92. Trump’s tariff U-turn supports improved risk sentiment and is weighing on USDJPY. Japan’s March PPI came in hotter than expected at 0.4% m/m (vs. 0.2%), pushing the y/y figure to 4.2% from 4.1%.
AUDUSD traded in a 0.6117–0.6204 range overnight, climbing on the back of broad US dollar selling. Domestically, inflation expectations jumped to 4.2% in March from 3.6% in February, though annualized figures remain at 2.4%.