Currency Chaos: Trump’s Policy Shifts Shake CAD/USD

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.4330-1.4570

Euro                 1.4830-1.5050

Sterling            1.7550-1.7790

WTI Oil (opening level) $75.54

The CAD is opening at 1.4446 ( 0.6922 )

What a roller coaster ride. Yesterday, the CAD/USD rate was close to where we opened this morning. But what happened in between was impressive. First off, yesterday was a bank holiday in the USA with MLK day. It was also inauguration day, where Trump would be speaking and declaring policies that will affect the price of oil, currencies, virtual coins, and trade with the world. At 9am the Wall Street Journal came out and reported that Trump would not be announcing the 25% tariff with Canada and Mexico. So the CAD traded about 2 cents lower within minutes. That was huge. But later in the day Trump explained that he will be reviewing the trade policy and tariffs may be on starting Feb. 1, and by evening, all of the gains were erased.

·    Donald Trump’s Inaugural Address failed to mention the implementation of tariffs in his speech. But a story circulated earlier yesterday that he has issued a memo instructing federal agencies to review trade policy, specifically with China, Canada and Mexico, particularly on concerns related to persistent trade deficits and currency manipulation.

·    Later in a short press conference, Trump mentioned that he would probably put 25% tariffs on Mexico and Canada on February 1, which led to sharp weakness in the Canadian dollar and Mexican peso.

·    Trump also linked the sale of TikTok by China’s Bytedance to the threat of tariffs against China if a deal was not struck within 75 days.

·    Equities: Trump tariff delay, autos lead Europe, Hong Kong gains, Netflix earnings

·    Volatility: VIX futures slightly lower, muted moves, earnings watch

·    Digital Assets: Bitcoin traded in a range between $101 k and $109 k - quite volatile

·    Currencies: USD lower as Trump waits on tariffs, but mention of coming large tariffs on Canada and Mexico weigh

·    Commodities: Crude stumble; investment metals bid as trade wars loom

·    Fixed Income: US treasury yields plunge after Trump’s inaugural address

·    Macro events: UK Earnings and Jobs data, Germany ZEW, Canada CPI