Japan’s Manufacturing Confidence Drops to 1-Year Low, Weighing on Market Sentiment

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

US Dollar        1.4300-1.4500

Euro                 1.5420-1.5640

Sterling            1.8470-1.8690

WTI Oil (opening level) $71.50

The CAD/USD is opening at 1.4400 ( 0.6944 )

Traders are waiting for Trump's tariff announcements before placing fresh directional bets. The Canadian $ is undermined by the risk of further escalation of a trade war. This along with the political uncertainty ahead of the election - in 4 weeks- will likely keep the USD/CAD trading in recent ranges.

Headlines

Australia’s Reserve Bank left its policy rate unchanged at 4.10% as most expected and continued to describe its current policy level as restrictive, with inflation moderating and the labor market still tight. The board was cautious about the outlook, still forecasting inflation to moderate, but bemoaning uncertainties abroad and the impact on confidence from US President Trump’s tariff policies. Australian short yields dropped two basis points and the AUD traded sideways on the decision as the market prices the RBA to cut twice more this year.

President Trump is pushing for significant tariffs, with threats against Iran and secondary tariffs on Russian oil. The White House Press Secretary stated the tariffs aim to end unfair trade practices, targeting countries treating the US unfairly. Trump is considering multiple tariff plans ahead of what he has billed as “Liberation Day” tomorrow. Fed officials recommended assessing tariff impacts before policy changes. 

The Bank of Japan's Tankan survey of large manufacturers fell to 12 in early 2025, its lowest in a year, amid U.S. tariff concerns. Confidence dropped notably among textile, petroleum and coal, iron and steel, basic materials, and pulp and paper producers. Both the small and large non-manufacturing Tankan survey readings saw new modern highs for the cycle.

Germany's CPI came in at 2.2% YoY in March 2025, the lowest since November 2024, driven by slower services inflation at 3.4% and a larger decrease in energy costs at 2.8%. Food inflation rose to 2.9%, while core inflation, excluding food and energy, fell to 2.5%, the lowest since June 2021.

Key Points

·    Equities: US +0.5% on tariff relief hopes; EU down sharply; tech weak

·    Volatility: VIX 22.28; skew spikes; Trump’s “Liberation Day” looms

·    Digital Assets: BTC +0.9%, ETH +1.4%; mining stocks hit; new Trump-linked BTC firm

·    Currencies: JPY volatile on last day of Japan’s financial year yesterday – rebounded overnight versus the USD.

·    Fixed Income: US long treasury yields drop back after intraday rise yesterday

·    Commodities: Crude’s rising supply risk. Corn favored by US farmers. Gold leaves silver and platinum trailing