- Trump threatens South Korea with new tariffs
- EU and India sign historic trade deal
- US dollar trading defensively
USDCAD open: 1.3706, overnight range 1.3693-1.3740, close 1.3711, WTI 60.95, Gold 5086.77
The Canadian dollar traded in a tight range and modestly underperformed its G-7 peers following a burst of tariff threats from Trump and his inner circle on the weekend, Treasury Secretary Scott Bessent accused Carney of an “about face” on steel tariffs while reiterating Trump’s threat of imposing 100% duties. The rhetoric reinforced market unease over the durability of US trade policy commitments.
US Ambassador to Canada Pete Hoekstra escalated tensions further by warning of China-Taiwan-style repercussions should Canada opt to purchase its next-generation fighter aircraft from any supplier other than Lockheed Martin.
Rising gold prices, firmer oil prices, and a broad global aversion to US dollars have capped any upside momentum. FX markets are expected to remain subdued ahead of tomorrow’s Bank of Canada and Federal Reserve policy decisions, with both central banks widely expected to leave rates unchanged.
WTI crude traded in a 60.16-61.03 range and is holding near 60.69 in NY trading. Prices are being supported by reports that the USS Abraham Lincoln carrier group is positioned in the Indian Ocean and capable of supporting military action against Iran. Additional support is coming from Mexico’s decision to cancel an oil shipment bound for Cuba and from cold weather across large parts of the US.
Gold (XAUUSD) traded in a 5008.35-5101.10 range and is hovering near yesterday’s highs as investors continue to sour on the US outlook.
The move was driven by Trump’s latest tariff broadside, in which he accused South Korea of failing to honour its trade commitments and announced an increase in tariffs on autos, lumber, pharmaceuticals, and other goods from 15% to 25%.
Asian equity markets brushed off the latest tariff rhetoric and closed higher, with Japan’s Topix up 0.31%, the Hang Seng gaining 1.35%, and Australia’s ASX 200 advancing 0.92%.
As of 7:20 am, European equities followed suit, with the UK FTSE 100 up 0.43%, France’s CAC 40 higher by 0.36%, and Germany’s DAX is flat. S&P 500 futures are 0.24% higher. The US Dollar Index sits at 96.78, and the 10-year Treasury yield is 4.226%.
EURUSD traded in a 1.1851-1.1900 range and remains supported by improving trade fundamentals. The EU and India finalized a sweeping trade agreement that will see India reduce tariffs on 97% of EU imports, saving roughly €4.0 billion annually, while the EU will phase out tariffs on 99.5% of Indian goods over seven years. Agricultural products were excluded from the agreement.
GBPUSD firmed in a 1.3664-1.3707 range and retains a bullish bias. UK Prime Minister Keir Starmer is travelling to China for the first visit by a UK prime minister in eight years, seeking to recalibrate relations with Beijing. The trip has taken on added urgency following recent geopolitical tensions linked to Trump’s comments on Greenland.
USDJPY bounced in a 153.19-154.88 range and is consolidating near the lower end of recent price action. Political uncertainty in Japan, sharply higher JGB yields, and lingering concern over potential Fed and Bank of Japan FX intervention continue to weigh on sentiment.
AUDUSD inched higher in a 0.6902-0.6932 range and is pressing the top of that band. The pair is supported by broad US dollar softness, elevated gold prices, and stronger-than-expected NAB Consumer Confidence, which rose to +9 from +7 previously. Ongoing debate over whether the RBA could hike rates next week is also providing underlying support.
US Consumer Confidence and the Case-Shiller Housing Price Index are on tap.
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