CAD
After much speculation, new Liberal PM Mark Carney has called a snap election for April 28th, a move that while not impacting USDCAD significantly this morning, we are inclined to see as constructive for the loonie. Crucially, it minimizes the length of time that Canada will be without effective government – we had thought it could take until mid-year for a new administration to be formed. Even so, we are far from becoming loonie bulls just yet, with tariff risks continuing to loom large. With Trump’s April 2nd deadline now just around the corner, this should begin to refocus minds, and not in a CAD positive manner.
USD
Despite dipping lower through early trading, the dollar remains some way off last week’s lows with the DXY index stabilising just north of 104 heading into the weekend. This week, S&P PMIs, a third reading of Q4 GDP, and personal spending data, headline the US docket. That said, with no top-tier releases on offer, we suspect it will be Fedspeak and commentary from the White House that ends up in the driving seat for the greenback. The first of these should garner special attention as markets continue to digest last Wednesday’s FOMC meeting. As we noted following the decision, Powell’s commentary looked somewhat more hawkish on the second reading, especially when compared to market-implied easing expectations that favour three rate cuts through the remainder of this year. Meanwhile, toward the back end of the week tariff risks should also return to the fore, with Trump’s April 2nd deadline fast approaching. And, as we see it, both factors favour dollar upside, albeit with month and quarter-end flows to contend with too, traders could be in for a choppy ride, especially toward the back end of this week.
EUR
PMIs offer a busy start to the new week for euro traders, with our house call having looked for an upside surprise on this occasion. As we noted in our preview, the timing of the survey dates means that this round of figures is likely to capture the optimism around increased eurozone fiscal spending, but not the challenges that accompany it. This appears to have been realised too, at least at first glance. Increased defence and infrastructure spending garner a mention across both the German and Eurozone reports, with both also seeing an unexpectedly strong bounce in manufacturing prints. That said, the aggregate composite print for the bloc as a whole underwhelmed, led by a softer-than-expected services reading. This has capped EURUSD gains so far today, with the pair struggling to make further headway after a positive start overnight.
GBP
As with the rest of Europe, traders in the UK will also be keeping a close eye on PMIs this morning, albeit, we see less reason for optimism. The March 26th Spring update is likely to be front of mind for firms, having been stung back in October by the Chancellor’s decision to hike payroll taxes and the minimum wages. Not only is that likely to be reflected in the PMI numbers, weighing on sterling to start the week, but our base case sees Rachel Reeves underwhelming on Wednesday too, piling additional downside pressure on the pound.
This content was originally published by our partners at Monex Canada.