– Canadian inflation not expected to have much impact on FX.
– Focus is on US/Russia talks in Saudia Arabia.
– USD opens with a mixed tone.
USDCAD: open 1.4193, overnight range 1.4179-1.4209, close 1.4184
The Canadian dollar rally ran out of steam and traded quietly yesterday and overnight. Canada was closed Monday for Family Day, which yesterday meant families getting together to clear about 40-50-centimters of snow from sidewalks and driveways.
Canada’s January inflation data is expected to show and increase of 0.1% m/m and 1.9% y/y. the results are well within the BoC’s targeted range of 1-3% and should not have much impact on USDCAD trading as it it is Trump and tariff talks that is moving markets.
WTI oil prices traded quietly in a 71.08-72.03 band but with a negative bias. The prospect of increased US crude production and the online economic slowdown in China has raised concerns of supply outstripping demand. Those concerns are reinforced by expectations that Opec will increase production next month.
EURUSD traded in a 1.0452-1.0487 band as markets reacted to a mix of geopolitical and economic factors. Traders are assessing the risks of U.S. tariffs, the potential for a Russia-Ukraine peace agreement, and Trump’s criticism of NATO. The dovish ECB stance also weighed on sentiment. Meanwhile, German and Eurozone ZEW surveys showed strong improvements, rising to 26 from 10.3 and to 24.2 from 18, respectively, but the focus remains on U.S.-Russia discussions.
GBPUSD danced around in a 1.2591-1.2625 range after closing at 1.2587 on Friday, supported by UK labor market data. The unemployment rate held steady at 4.4% (forecast 4.5%), while employment increased by 107,000 in the three months to December, surpassing the previous 35,000 gain. Despite the stronger data, analysts do not expect it to influence the BoE’s gradual approach to rate cuts.
USDJPY traded in a 151.79-152.24 band as investors digested Japan’s economic data. Fourth-quarter GDP growth outperformed expectations, rising 2.8% q/q (forecast 1.00%), reinforcing speculation about a possible BoJ rate hike.
AUDUSD traded sideways albeit with a modestly bullish bias in a 0.6334-0.6368 range following the RBA’s widely expected rate cut. The OCR was cut to 4.10% from 4.35% and the door is open to further rate reductions. RBA Governor Michele Bullock justified the move by citing moderating inflation and continued labor market strength. However, she cautioned that it is still too early to declare victory over inflation.
