CAD
The Canadian dollar continued to trade near multi-year lows on Tuesday, hampered by political uncertainty at home and fears of new US tariffs under the soon-to-be-seated administration. With a light domestic data calendar this week, market participants remain focused on broader risk sentiment, potential trade policy announcements, and energy price fluctuations, all of which could either exacerbate or alleviate pressure on the Loonie in the short term.
USD
The dollar held near pandemic-era highs on Tuesday, buoyed by lingering expectations that the returning Trump administration will revive the protectionist policies seen in his first term. Yesterday’s session was relatively quiet ahead of today’s CPI release—a key barometer for the Federal Reserve as it gauges the resilience of the US economy against potential inflationary pressures from tariffs. Our current base case is that the Fed remains on hold until the incoming administration’s policy details become clearer. However, tomorrow’s retail sales report will also factor heavily into the near-term outlook.
EUR
On Tuesday, the euro extended its downward trajectory, pressured by ongoing political uncertainty, elevated inflation, and subdued growth prospects. Several ECB officials are slated to speak this week. At the same time, minutes from the December meeting—due tomorrow—may shed light on how policymakers plan to steer monetary policy in the face of persistent global headwinds. Traders will be keen to see if the Bank can balance caution on inflation with the need to support faltering growth in the Eurozone.
GBP
Sterling started the week under notable pressure following last Friday’s strong US jobs data, amplified by renewed anxiety around gilt yields. Although the pound regained some ground Tuesday afternoon, it remains vulnerable, given continued concerns about the UK’s fiscal posture and political landscape. Attention now turns to tomorrow’s UK inflation figures, which could influence whether the Bank of England sticks to its projected rate cut at next week’s meeting. Also on deck is the UK’s month-on-month GDP release, offering fresh insight into domestic growth momentum amid lingering headwinds.
This content was originally published by our partners at Monex Canada.