Ukraine Agrees to US-Proposed Truce as Aid Deal Progresses

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

US Dollar        1.4290-1.4530

Euro                 1.5590-1.5820

Sterling            1.8550-1.8780

WTI Oil (opening level) $66.92

The CAD/USD is opening at 1.4411 ( 0.6939 )

All eyes are on the Bank of Canada this morning, with market consensus expecting another rate cut—the seventh in a row.

This time, the talk is about a 25-basis-point reduction, similar to the move in January.

Meanwhile, the CAD has been losing some steam lately, falling from last week’s highs and trading around the 1.4500 level USD whenever Trump digs in with stronger tariffs.

Headlines

·    US tariffs of 25% on all steel and aluminium imports went into effect this morning, with President Trump backing off the threat of doubling the tariff against Canada after the Canadian province of Ontario cancelled a 25% export duty on electricity to the US. Canada is the largest exporter of both steel and aluminium to the US.

·    The EU this morning enacted “swift and proportionate countermeasures” against the US after the latter imposed tariffs on EU steel and aluminium exports, to be applied to US imports worth up to EUR 26 billion. They are meant to be in place from early to mid April.

·    Ukraine has accepted a US proposal for a 30-day truce with Russia as part of a deal to lift the freeze on military aid and intelligence, and includes a pause in hostilities, prisoner swaps, and a deal on Ukraine's mineral development. The US will now take the proposal to Russia's President Vladimir Putin to seek his agreement on a proposal

·    Job openings in the US rose by 232,000 to 7.74 million in January 2025, exceeding the expected 7.63 million. Retail trade, finance and insurance, and health care and social assistance saw notable increases, while professional and business services experienced a decline.

·    Bank of Japan’s Ueda stated that he is not concerned about the level of Japanese Government Bond yields, suggesting that “the rising trend since last year reflects the market’s views on the economy and inflation, or shifts in interest rates overseas”.

Key Points

·    Equities: US stocks decline as Trump hikes Canada tariffs; Europe slumps

·    Volatility: VIX at 26.77, Euro Stoxx volatility at 7-month high

·    Digital Assets: Crypto markets corrected slightly this morning

·    Currencies: JPY weakens on yield rebound. EURUSD advance retreats slightly

·    Fixed Income: New dramatic steepening in European yield curve as 13-year highs in Bund yields eyed.

·    Commodities: Silver underpinned by copper rally, oil rebounds on Iran supply risks

·    Macro events: Bank of Canada meeting, US Feb. CPI, US 10-year Treasury Auction