Traders Pause as Markets Brace for Trump’s Tariff Decision

02.04.2025

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

US Dollar 1.4220-1.4430

Euro 1.5360-1.5580

Sterling 1.8430-1.8640

WTI Oil (opening level) $71.03

The CAD/USD is opening at 1.4320 ( 0.6983 )

The move yesterday on all commodity currencies stalled overnight as traders wait on the sidelines ahead of the Trump tariff announcement later today.

If traders are able to take the CAD to 1.4235 -and then to 1.4200- the 100 day moving average will be broken and a bearish sentiment may development. If not, then 1.4400 will be reclaimed on its way to 1.4550.

Let's see what the day / news delivers.

Headlines

· Two US House of Representative seats remained in Republican hands after special elections to replace the two Republicans that were nominated for Trump administration positions, although the margin of victory fell by about half in both elections to 16-17 points from 33-34 points in the November elections, suggesting US President Trump is losing some of the middle ground.

· For today’s “Liberation Day” tariff announcements in a Rose Garden event scheduled for today at 2000 GMT, US President Trump is considering three tariff strategies: a blanket 20% on all trading partners, tiered rates, and country-specific rates, with a focus on the latter. Additional tariffs are likely on pharmaceuticals and semiconductors, a lifting of fentanyl-related tariffs for Canada and Mexico, and imposing secondary tariffs on Venezuela. Put together, the tariffs could exceed the scope of the infamous 1930 Smoot-Hawley tariffs.

· US February JOLTS Job openings dropped 194,000 to 7.568 million in February 2025, missing the 7.63 million forecast. Declines occurred in retail trade, finance and insurance, health care and social assistance, leisure and hospitality, and manufacturing.

· The March US ISM Manufacturing PMI came in lower than expected at 49 vs 49.5 expected while ISM manufacturing prices surged to 69.4, above expectations of 64.6. The report indicated that “price growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth.

Key Points

· Equities: Tech leads gains; Trump tariff speech looms; EU rebounds but opens lower

· Volatility: VIX dips ahead of Trump’s speech; traders cautious; gold, sector options in play

· Digital Assets: BTC -1.2%; crypto stocks up; Circle IPO filed; ETH fee revenue hits low

· Currencies: Pro-cyclical currencies bounce back with risk sentiment yesterday as USD sideways ahead of today’s US tariff announcement barrage

· Fixed Income: Credit spreads on high yield debt have widened dramatically over last week

· Commodities: Gold traders ponder how much has been priced in. Strong day for softs

· Macro events: US Mar. ADP Employment Change, US “Liberation Day” Trump tariff announcements

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