CAD
In keeping with the greenback’s broad-based climb on Wednesday, USDCAD rose through the 1.42 level, adding 0.3pp over the course of the session. Industrial prices are the only domestic event of note – hardly likely to do much for loonie valuations. That said, tomorrow’s speech by BoC Governor Macklem is a very different question. While we think that Canadian inflation is softer than headline readings indicate, we are less than certain that this view is shared by the Governing Council, leaving risks ahead of tomorrow’s event two-sided for the loonie. Until then, Trump remains the main focus for traders in North America.
USD
Yet more comments from Donald Trump were responsible for dictating dollar price action yesterday. Most notably, the President took another swipe at Volodymyr Zelenskyy, keeping markets nervous over the outcome of Russia-Ukraine peace negotiations. This, along with tariff risks, supported greenback upside through much of Wednesday’s trading. The same cannot be said for the January FOMC meeting minutes, however, released yesterday evening. These read as somewhat more neutral than both Powell’s post-meeting press conference back in January, and more recent Fed commentary. The upshot is that markets begin today having marginally accelerated Fed easing bets, a development that has seen the DXY index slip back below the 107 mark. Today, initial jobless claims should be in focus from a data perspective. But, the White House should remain the primary driver of market volatility, leaving dollar risks skewed to the upside if we are correct.
EUR
A light data calendar should keep euro traders firmly focused on tomorrow’s PMIs and German elections taking place at the weekend. We doubt that ECB speakers will have much to offer markets, despite a raft set to hit the airwaves today. This should also leave EURUSD at the mercy of events in the US, and specifically Donald Trump, if we are correct. The pair slipped on Wednesday, briefly threatening 1.04 before rebounding modestly through yesterday evening. We are inclined to look for another run lower today if our base case materialises.
GBP
As with the euro, sterling also looks set for a relatively quiet day. There are no BoE speakers of note scheduled, and only CBI sales readings are listed in the data calendar. This should ensure that the cable price action continues to be dictated from the other side of the Atlantic ahead of tomorrow’s retail sales release and February’s PMI report.
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