CAD
While most dollar pairs were relatively unmoved by Trump’s comments overnight, the loonie was not amongst them, with USDCAD testing the 1.45 level before falling back in recent hours. Despite the reversal, we continue to think USDCAD has more upside to come – this afternoon’s GDP readings are likely to show that activity in Canada contracted in November, while tariffs over the weekend should place further downside weight on the loonie. Indeed, if we are right and tariffs are realised, we would not be at all surprised to see USDCAD trading several points higher come Monday morning.
USD
Renewed tariff threats directed at Mexico and Canada overnight saw a brief but mostly temporary pickup for the dollar. As we have noted previously, markets have begun to tire of the rhetoric out of the White House – more concrete action will likely be needed on this front to support another greenback rally. That said, we think it is coming, likely this weekend. We remain more convinced that tariff threats are credible relative to market consensus. For now, though, the DXY index continues to hover around the 108 mark, with only PCE data and a speech by the Fed’s Bowman due this afternoon. Neither should be too market-moving, a reality that leaves the dollar’s fortunes in the hands of Donald Trump over the weekend.
EUR
EURUSD starts Friday morning trading under pressure, helped in part by Trump’s overnight comments, but also by French CPI data published this morning. According to the latest round of January figures, price growth undershot expectations, with YoY inflation landing at just 1.4%. We see little reason for data later in the day to offer much relief for EURUSD either. German CPI readings are also likely to show slow price growth at the start of the year, while we suspect that the ECB’s survey of professional forecasters will have little good to say about the bloc’s outlook when considering the downside risks on the horizon.
GBP
Slowing house price growth is the main UK story to end the week, with Nationwide house price data indicating a 4.1% YoY increase in prices. With nothing else on the docket, and no central bank speakers of note, we expect sterling to track euro moves through today’s trading, skewing risks in favour of further downside against the dollar.
This content was originally published by our partners at Monex Canada.