The USD steadies, oil prices weaken, equity markets and US yields are mixed as tariff and trade war fears loom. The USD holds onto gains as China's retaliation tariffs kick in, while tariffs with Canada & Mexico are paused for 30 days. Equity markets remain under pressure, US futures retreated, indicating a third day of losses, and Europe's Stoxx 600 fell for a second day. China launched limited levies on US exports that will start February 10th, which should give Washington & Beijing time to reach a possible deal that Chinese policymakers have signalled that they how to strike with the US. Elsewhere, oil prices declined on easing tariff concerns and declining demand outlook. Bitcoin remains under pressure, falling near 3% to $98.8k, and Gold & Silver prices also weaken. In focus today will be the US Factory Orders & US Jolts Jobs openings will help provide intraday direction currency markets.
News headlines. China hits back at Trump with tariffs on US. The EU pushes forward with enforcing AI Act despite Trump Warning. Former NATO Chief Stoltenberg to become Norway's finance minister. India's central bank seen cutting rates for first time since May 2020. Japan's 2024 food exports hit record high despite China's seafood import bans. USAID contractors fire staff, face cash crunch as Trump causes chaos in aid world. Ukraine's politics warm up as US focuses on war's endgame. Feeling disrespected by tariffs, Canadians are spending elsewhere with vengeance.
In currency markets. Currency markets steady after a volatile Monday as tariff fears ease for Canada and Mexico, and optimism remains grows that China & the US could reach a trade agreement by Feb 10th. CNY is up 0.1%, while Asian currencies firmed by 0.3% on average against the USD. Trading currencies are mixed, with MXN eased by 0.1%, AUD, JPY & ZAR flat, NOK firmed by 0.1%, and CHF, SEK & NZD gains by 0.3% against the USD.
In commodity markets. Oil weakened by 1.7%. Natural Gas prices tumbled by 4%. Gold & Silver prices eased by 0.55%. Copper prices strengthened by 0.6%. Wheat prices fell by 0.45%, and Soybean prices are flat.
CAD saw a volatile start to February, testing a high of 1.4793, a multi-year low after the US announced tariffs on the weekend, and then rallying to 1.4388 when tariffs were paused. The loonie opens above 1.4400 while oil prices weaken, and investors remain cautious after temporarily relieving US tariffs for 30 days. intraday, US economic data will help provide direction to the loonie, but the loonie will remain vulnerable to any new tariff comments.
EURCAD remains stable in early trading, even with weaker commodity prices, as both currencies continue to be overshadowed by US tariffs.
EUR bounced off Monday's lows rebounded above 1.0300 after tariffs were paused in Canada and Mexico. The euro bounced back from multi-week lows against the US dollar following Trump's decision to pause tariffs on Mexico and Canada, giving rise to some optimism that the EU might reach a compromise regarding potential US tariffs. While the euro remains susceptible to further declines due to US tariff threats, intraday US data releases are expected to provide direction for the single currency.
GBPEUR eased after recording its biggest daily rise in three months as the UK continued to ignoreUS tariff threats.
GBP extended gains through 1.2400 as risk sentiment improved following the suspension of North American tariffs. The pound rebounded from a two-week low of 1.2250 following comments that President Trump saw a deal for the UK to avoid US tariffs. Domestically, the focus will be on the Bank of England interest rate decision on Thursday, when the bank is expected to cut rates by 25 bps. Intraday, the US Jobs & Factory Orders will help provide direction for the pound.