The USD is weaker, oil prices have fallen, equity markets are mixed, and US yields have eased due to earnings and trade war concerns. The USD extended its losses after job openings fell more than expected in December, testing a three-month low. Global equities remain under pressure following disappointing earnings, which heightened concerns about the outlook for major tech companies, with attention shifting to Amazon.com Inc.’s earnings today. Risk concerns are also rising as investors react to the escalating trade war between the US and China, especially after the US Postal Service temporarily suspended inbound international packages from China and Hong Kong. Elsewhere, oil prices dropped as worries over the trade war overshadowed the announcement of reinforced sanctions on Iran. Bitcoin continues to face pressure, falling below $98k, while gold prices tested a record high of 2,901.50 today. In focus today are the US ADP Employment Change, ISM Services PMI, and speeches from the Fed's Goolsbee, Bowman, Barken, and ECB Lane, which will help guide the intraday direction in the currency markets.
News Headlines. The US Postal Service suspends China packages as tariff war heats up. The Arab world reacts with anger to Trump's Gaza plans. Alphabet shares sink after cloud growth stalls and spending surges. Honda and Nissan's $58bn merger close to collapse. US gold rush drives up borrowing costs for precious metal in London. Australia, Japan, Philippines, US to conduct maritime cooperative activity. Government to spend extra GBP 250mn on flood defences in England. Most big polluters to miss the UN deadline for 2035 climate targets. Buy Canadian' movement gains momentum among merchants and shoppers.
In currency markets. The USD index continues under pressure, testing a fresh three-month low. Indian Rupee drops to a record low on expectations the RBI will cut interest rates. China keeps the CNY steady in the first fix since US tariffs. CNY & Asian currencies on average weakened by 0.3% against the USD. Trading currencies mostly improve a weakening USD, with JPY weakened by 0.9%, MXN up 0.1%, ZAR firmed 0.2%, NOK & CHF gained by 0.35%, AUD strengthened 0.5%, and NZD & SEK rallied 0.75% against the USD.
In commodity markets. Oil price weakened by 0.9%. Natural Gas prices tumbled by 1.5%. Gold prices strengthened by 0.65%. Silver prices eased by 0.3%. Copper prices firmed by 0.2%. Wheat prices rallied by 0.75%, and Soybean prices dipped by 0.1%.
CAD continues to gain ground despite weakening oil prices, reaching fresh multi-week highs of 1.4272 amid a softer USD and a pause on US tariffs. Our bias remains to buy USD on any dips, as the loonie stays vulnerable due to the prospect of a US/China trade war, expectations of further BoE interest rate cuts in H1/25, and ongoing uncertainty following the 30-day tariff pause. Intraday, the US jobs and PMI data are expected to provide direction for the loonie.
EURCAD holds steady as both countries are concerned about US tariffs. Both central banks are expected to remain dovish on interest rates, but weakening oil prices could put pressure on the loonie.
EUR has retested February highs amid a softening USD.The euro is benefiting from the weaker USD following Tuesday's JOLTS Jobs Openings, which declined to 7.6 million in December, falling short of market expectations of 8 million. The focus has shifted to today’s ADP Employment Change and ISM Service PMI, which are expected to provide further direction for the greenback. Our bias remains to sell the euro on the current rally, as the potential for a test of parity against the USD remains high due to the prospect of US tariffs, and a dovish ECB will weigh on the single currency.
GBPEUR holds steady, with both currencies sidelined against a softer USD and as investors await Thursday's BoE interest rate decision.
GBP tests a fresh monthly high amid a weakening USD following disappointing US jobs data. The pound reached its highest level against the USD at 1.2550, marking its peak since January 7th. Investor confidence is returning to the UK after President Trump's remarked that the UK could be exempt from US tariffs. Attention will be on Thursday's Bank of England interest rate decision, with the BoE widely expected to cut interest rates by 25 bps tomorrow. Intraday, the focus will shift to US jobs data; further weakness in the US jobs market could open the door to an earlier-than-expected Fed rate cut.
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