- Canada CPI expected at -0.2% m/m in December
- Risk aversion rises on Trump’s latest tariff salvo.
- US dollar slides despite rise in Treasury yields.
USDCAD open: 1.3887, overnight range 1.3884-1.3918, close 1.3917, WTI 58.98, Gold 4671.72
US markets are closed for Martin Luther King Day
The Canadian dollar sank after Prime Minister Mark Carney unveiled a series of China-related agreements, as traders braced for a negative reaction from Trump to Canada signing investment memorandums and cutting tariffs. That move quickly unwound after Trump indicated he was unbothered by Carney striking a deal with Beijing, prompting USDCAD to slide back to the session low.
That calm is unlikely to persist. Trump has a long track record of reversing course, and chatter is already circulating that Carney will deploy Canadian troops to Greenland as a symbolic show of support against Trump’s annexation plans.
Canada’s December CPI is expected to contract by 0.3% m/m after a 0.1% rise previously, while the year-on-year rate is forecast to hold steady at 2.2%. Later today, attention turns to the release of the Business Outlook Survey for further clues on domestic demand and corporate sentiment.
WTI traded in a 58.57–59.56 range, easing as fears of a US missile response against Iran diminished despite ongoing unrest and a heavy-handed domestic security response inside the United States.
Trump is off to Davos in his continuing quest to wreak havoc across the world and force the world to do his bidding. After boasting since April 1 about sweeping trade and tariff agreements with Europe, he abruptly announced a fresh 10% tariff on eight European countries, Denmark, Sweden, Norway, Germany, France, Holland and the UK, rising to 25% on June 1. The tariffs are punishment for those countries deploying troops to Greenland in support of its sovereignty.
Asian equity markets turned defensive and finished lower. Hong Kong’s Hang Seng Index fell 1.05%, Australia’s ASX 200 slipped 0.33%, and Japan’s Topix ended the session flat.
By 7:40 am, European markets are trading poorly. France’s CAC-40 is down 1.50%, Germany’s DAX is 1.27% lower, and the UK’s FTSE 100 has fallen by 0.50%. S&P 500 futures have lost 1.08% the US Dollar Index is 99.14 and the US 10-year Treasury yield is 4.247%.
EURUSD caught a bid and traded higher in a 1.1578–1.1641 range, despite the latest round of trade hostility from Washington. French President Emmanuel Macron has called on the EU to deploy its anti-circumvention instruments to prevent companies from skirting trade or sanctions measures, while EU officials are weighing retaliatory tariffs of up to €93 billion on US goods.
GBPUSD traded in a 1.3344–1.3415 range, extending gains as UK Prime Minister Keir Starmer condemned the use of tariffs against allies acting in support of NATO security. Markets largely ignored the rhetoric from Washington and instead looked ahead to UK labour market data due tomorrow and inflation figures scheduled for Wednesday.
USDJPY rallied in a 157.43–158.17 range, with the yen finding support during Asian hours as risk aversion crept into markets. The subsequent rebound followed Prime Minister Sanae Takaichi’s decision to call a snap election for February 8, accompanied by a proposal to temporarily eliminate the sales tax on food for two years.
AUDUSD climbed in a 0.6668–0.6706 range, buoyed by firmer Chinese economic data and strength across commodity prices, which helped offset broader risk-off sentiment.
