USD/CAD 15 mins
Monday was a roller-coaster for Canadian dollar traders as the loonie jumped to a one-month high at the start of the day on a report that Trump wouldn’t announce any tariffs on Day 1. Instead, he issued a memo asking to study trade deficits, including against Canada.
That flipped late in the day (early in Tuesday’s Asian FX trade) when he said:
“We are thinking in terms of 25 per cent on Mexico and Canada because they are allowing vast number of people, Canada is a very bad abuser also, vast numbers of people to come in and fentanyl to come in,” he told reporters.
That sent USD/CAD to 1.4515, which is a cycle high but it’s since slipped to 1.4445.
With that kind of threat, the Bank of Canada is more-likely to cut rates on January 29. The market is currently pricing in an 80% chance.
That will swing further on CPI data due at the bottom of the hour. The consensus is a benign -0.4% m/m reading a +1.9% y/y reading.