The Morning Update

Tuesday March 18th, 2025

Written by:
Bernard Gauvin

The USD is trading lower as oil continues its upward movement, equities remain flat, and bond yields rise. The USD remains near recent lows as markets focus on the negative impact of Trump policies on the economy. Recent US data has underperformed, including payrolls, CPI, and retail sales. The upcoming FOMC meeting will be closely watched, particularly for changes in the dot plot and any acknowledgment of growth concerns.

News Headlines. Prime Minister Mark Carney stated that President Trump must stop making "disrespectful" comments about Canada, including threats of tariffs and joking about making Canada the 51st state, before serious talks on future ties can begin. Mexican authorities arrested Francisco Javier Roman-Bardales, an alleged MS-13 leader and FBI fugitive. He’s expected to be transferred to Mexico City before deportation to the U.S. to face charges. Germany's Bundestag is voting to lift limits on defense spending, potentially boosting military investment amid Russia's gains in Ukraine and US signals that Europe must rely more on itself for security. The Israeli military is conducting extensive strikes in Gaza, targeting Hamas "terror targets." The Hamas-run health ministry reports at least 330 Palestinian deaths. President Trump will speak with Putin on Tuesday to push for a ceasefire in the Ukraine war and a lasting resolution. The call tests Trump's deal-making skills and his controversial relationship with Russia, as he claims progress on a final agreement. Peru's president declared a 30-day state of emergency in the capital, deploying soldiers to aid police in response to rising violence following the killing of a popular singer. The decree restricts rights, including freedom of assembly and movement, allowing detentions without a judicial order.

In currency markets. The JPY drops, lifting USD/JPY (+0.35%) to a two-week high, supported by optimism over China’s stimulus and a USD recovery. Expectations for BoJ rate hikes and concerns over Trump's tariffs may limit further JPY losses, while BoJ and Fed decisions could cap the pair. The AUD weakened as the USD recovered amid Middle East tensions but strengthened later due to US economic concerns. RBA's Hunter noted a cautious approach to rate cuts, with the bank more conservative than market expectations. The other Asian currencies are hedging higher against the USD with the CNY up 0.04%, THB up 0.08% and MYR up 0.07%. The trading currencies are mixed this morning with the MXN losing 0.05% against the greenback, while the ZAR appreciated 0.12%.

In commodity markets. Trump's actions on Yemen and Israeli air strikes raise tensions, supporting Crude Oil prices (+1.5%). China's stimulus measures boost demand, but OECD's growth downgrade and the Fed meeting could weigh on prices. Geopolitical risks still favor bullish sentiment. Gold hit a new all-time high of $3,028(+0.95%) as Israel's military operations on Hamas positions raise tensions, likely ending the January ceasefire. Natural gas prices retrace this morning down 0.71%). The agricultural sector is mixed with Wheat up 0.15%, Soybean down 0.04$ and Lumber off 0.11%.

Current level USD Index                103.318          Down 0.05%

USD/CAD With CPI is expected to rise slightly in February, the BoC could possibly pause its quantitative easing program offering some support for the C$. Rising oil prices continues support the C$

Current level USD/CAD                   1.4289            Down 0.02%

EUR/CAD after last 2-weeks recent spike the currency pairs is consolidating around the 1.5600 area.

Current level EUR/CAD                   1.5627            Up 0.14%

EUR/USD continues to rise as the USD struggles ahead of the Fed's interest rate decision on Wednesday. Traders expect the Fed to keep a "wait and see" approach amid uncertainty over Trump's tariffs. The OECD downgraded US GDP growth forecasts, warning that trade barriers could slow growth and increase global inflation.

Current level EUR/USD                   1.0933            Up 0.10%

GBP/EUR remains steady, with traders awaiting Germany's crucial vote on its spending plan. Traders now expect two ECB rate cuts in April and June. EUR/GBP faces pressure as GBP strengthens, with the Bank of England likely to maintain rates, balancing growth concerns and inflation risks.

Current level GBP/EUR       1.1880 (0.8430)         Down 0.01%