CAD
Unsurprisingly, the loonie traded under pressure to start the week. With tariff risks front and centre, long USDCAD remains a market favoured FX expression for import levy concerns. Even so, with the pair consolidating just shy of 1.44 overnight, it remains some distance from the highs seen to start the year when tariff risks were most acute. Given our view that risks skew in favour of larger tariff rises than markets are positioned for, we continue to see upside for USDCAD as the most likely outcome in the coming days, albeit given the uncertainty around tomorrow’s event, the range of potential outcomes remains wide for the pair.
USD
The dollar eked out gains to start the week as tariff jitters weighed on FX markets ahead of tomorrow’s “Liberation Day” announcement. Indeed, we suspect this will continue to be the major story today, a dynamic that should keep greenback risks skewed to the upside. Reporting overnight suggests that even officials close to the President have no idea what he will announce, with any final decision likely only being made either late this evening, or even tomorrow morning. With this in mind, conviction across markets remains low, and uncertainty high, a backdrop that favours further marginal dollar strength. That said, ISM manufacturing PMIs and JOLTS will also provide a distraction today. The former specifically should offer a steer on the ongoing impact of tariff threats, with the prices paid index having jumped notably in February, even as new orders slumped. Another grim set of prints might just take the shine off the dollar if realised, limiting gains in what should otherwise be another day of greenback upside.
EUR
Despite yesterday’s greenback rally, EURUSD managed to finish Monday above 1.08. We doubt this is likely to continue, with risks still skewed to the downside for the pair. Most prominently, these of course stem from tomorrow’s “Liberation Day” announcements. Albeit, given CPI undershoots across France, Spain, and Germany, aggregate eurozone inflation readings could also disappoint expectations this morning. On the speakers front, it is also notable that both Lagarde and Lane from the ECB are due to speak today – whether they endorse the prospect of an April hold after a recent uptick in speculation could also have an impact at the margin. That said, with swap implied expectations assigning a 30% chance of a cut, current pricing looks about right to us, if not a little dovish, limiting the need for either to start dropping hints to markets.
GBP
With little on the docket domestically, with neither Nationwide house price data, nor the BoE’s Megan Greene likely to make waves, the pound should be left at the mercy of market cross currents again on Tuesday. This dynamic saw the pound track sideways against the euro, even as the dollar made some gains to start the week. We see little reason to think that today should be any different.
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