Tariff Uncertainty Drives FX Volatility as Bitcoin Leads Crypto Rally

03.03.2025

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

US Dollar 1.4330-1.4550

Euro 1.5010-1.5230

Sterling 1.8180-1.8400

WTI Oil (opening level) $69.90

The CAD/USD is opening at 1.4434 ( 0.6928 )

As markets assess the implications of the Zelenskyy-Trump clash on Friday, the focus today is whether US tariffs on Mexico and Canada will go ahead. The FX market is not pricing in 25% duties as a base case, and still leans in favour of either smaller tariffs or another last-minute deal. Downside risks for CAD and MXN are, therefore sizeable

Headlines

· The US Atlanta Fed GDPNow GDP forecast was out Friday for the month of February with a reading of -1.48% after a string of months of stability above 2% of late. Some of the negative reading was down to a ballooning trade deficit as Americans front-run the risk of incoming Trump tariffs.

· Trump will host the first White House cryptocurrency summit on March 7th. He mentioned that the executive order on digital assets includes a strategic reserve featuring XRP, Sol, and ADA. Trump also highlighted that BTC and ETH, as key cryptocurrencies, will be central to the reserve and expressed his admiration for Bitcoin and Ethereum.

· US Commerce Secretary Lutnick stated that Mexico and Canada have managed the border reasonably well. However, tariffs on Canada and Mexico will be imposed on Tuesday, March 4th, with President Trump determining the levels. Lutnick also mentioned that tariffs on China will proceed unless they stop fentanyl trafficking into the US.

· The US trade deficit widened 25.6% to a record $153.3 billion in January with imports surging 11.9% to a record $325.4 billion, likely reflecting US companies securing supplies in advance of tariffs

· China's NBS Manufacturing PMI rose to 50.2 in February 2025, indicating expansion for the first time in three months. This improvement was driven by post-Lunar New Year activity resumption and Beijing's stimulus measures. On Wednesday, the National People Congress will unveil the economic plan for 2025.

Key Points

· Equities: Trump tariff deadline approaches; US stocks recover; Nvidia and Tesla rebound; EU tech weak; defense stocks rally

· Volatility: VIX drops 7.1%; markets stabilized; volatility hinges on trade war uncertainty and economic data

· Digital Assets: Bitcoin rebounds 20% from last week’s lows; Trump’s crypto reserve fuels rally; XRP +31%, Cardano +69%; Crypto Summit this Friday

· Currencies: USD mixed after starting the week off on a weak note. JPY rebounds

· Fixed Income: Friday saw new local lows in US yields while Japanese yields are rebounding and eyeing cycle highs.

· Commodities: Crude and gold trade steady after suffering a steep correction

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