– Relief rally lifts Loonie
– US reciprocal tariffs delayed until April
– USD opens defensively
USDCAD: open 1.4290, overnight range 1.4157-1.4202, close 1.4195, $71.42, Gold, $2935.70
The Canadian dollar surged yesterday, crashing through resistance and reaching a level last seen in the middle of December. The gains were fueled by relief that President Trump’s reciprocal tariff plan would be delayed until April.
The Canadian dollar rally is not because the threat of an economy killing trade war between Canada and the US and the US and the rest of the world has gone away. It was mostly due to a rebalancing of oversold Canadian dollar and other currency positions against the US dollar. Tariffs are a fact of life in the Trump Administration as they are the main weapon being used to force US trading partners to make their markets more accessible to American products.
Canadian and US markets are closed on Monday for holidays. Traders will be more focused on leaving early than on today’s U.S. data, which includes Retail Sales, Capacity Utilization, Industrial Production, and the Export Price Index. Canada answers with Manufacturing and Wholesale Sales.
EURUSD traded in a 1.0447-1.0488, band. The rally gained traction as traders welcomed the delay in Trump’s Reciprocal Tariff Plan until April, allowing room for potential negotiations. However, upside momentum may be limited near 1.0550 unless the EU concedes to U.S. trade demands, as further tariff threats remain on the table. Eurozone GDP increased by 0.1% q/q in Q4, slightly surpassing expectations.
GBPUSD firmed in a 1.2547 -1.2596 range, supported by yesterdays better than expected GDP data. Prices were also supported by improved global risk sentiment driven by the postponement of U.S. tariffs.
USDJPY is trading near the bottom of its 152.39 -153.15 overnight range. The drop in the U.S. 10-year Treasury yield from 4.66% on Tuesday to 4.52% overnight weighed on prices as did safe-haven flows due to lingering concerns over reciprocal tariffs. The uncertainty surrounding trade policies continues to pose risks to the global economy.
AUDUSD ranged between 0.6310 and 0.6345, rising to a new year-to-date high as overall risk sentiment improved. Traders are now turning their attention to the Reserve Bank of Australia’s upcoming monetary policy meeting on February 18, where a 25 bp rate cut is widely expected. Market participants will closely watch the central bank’s forward guidance, particularly given the ongoing uncertainties surrounding global trade.
