FOREX: CAD & MXN Get Late Boost on Tariff Implementation Extension

• Broad risk-off trade dominated global markets on Monday, prompting notorious safe haven swithin G10 FX to outperform, while risk sensitive currencies bore the brunt of the waning sentiment.
• The assumption that US firms will remain market-leaders in artificial intelligence was challenged this weekend with the rise of China's Deepseek - a product demonstrating that not only can AI be rolled out extremely cheaply and effectively, but also that the US' targeted chips sanctions are failing to contain China's tech industry.
• The USDJPY (-1.10%) selloff picked up momentum following the clean trendline break, drawn from the September lows, bolstered by the breach of a cluster of lows just below the 155 handle.
• Barring a meaningful reversal, the pair looks set to close below its 50-day EMA, which intersects today at 155.15. This would represent the first close below this average since December 09 and is a meaningful bearish development technically. This paves the way for an extension towards 152.55, a Fibonacci retracement point, and 151.81, the Dec 12 low.
• AUD (-0.55%) and NZD (-0.47%) are among the poorest performers, with the effect compounded by Trump's tariff sabre-rattling toward Colombia over the weekend. The USD Index is near last week's lows, holding close to the lowest levels of 2025. The Fed decision mid-week looks key here - as Powell's messaging on rates across this year is set to steer price action.
• Emerging market currencies have been heavily impacted, with notable 2% declines for the likes of the Mexican peso and the South African rand against the dollar providing a key insight to the sensitivities surrounding global equity sentiment and tariff related developments.
• US durable goods and consumer confidence highlights Tuesday’s docket, before G10 central bank decisions kick off on Wednesday.

SNB President Schlegel appears to be sticking to prior rhetoric in his interview with Swiss broadcaster SRF to be published today 9:15pm according to some preliminary headlines which appeared on Bloomberg. The headlines continue to lean dovish, but we would argue they reiterate Schlegel's prior communication:

• "IF NEEDED, EASING SHOULD BE DONE QUICKLY" note that he opposed any "dry powder" arguments at the press conference following the 50bp cut December meeting.
• "MONTHLY INFLATION DATA MAY DIP BELOW ZERO" also lines up with December meeting commentary
• "SWISS INFLATION TO BE RELATIVELY LOW THIS YEAR" in line with the conditional inflation forecast seeing Q1 average inflation at only 0.3% Y/Y.

Swiss STIR pricing meanwhile appears to have taken the commentary with a dovish tilt, with the Dec-25 3m SARON future pricing in around 3bp more easing since the headlines were released, for a current 99.90. However, note that SARON liquidity is likely limited at the moment given timing on the day.

EURCHF remains unchanged since the comments, hovering just above 0.9450 and down 0.58% on the session.

• Tsy futures gain slightly (TYH5 trades 109-05 last, +25) after $70B 5Y note auction (91282CMG3) stops 0.5bp through (third consecutive stop since June): drawing 4.330% high yield vs. 4.335% WI; 2.40x bid-to-cover steady to prior auction.
• Peripheral stats show indirect take-up  62.79% vs. 67.27% prior, directs rise to 26.09% vs. 20.26% prior (highest since Jul 2014), primary dealer take-up 11.12% vs. 12.47% prior.
• The next 5Y auction is tentatively scheduled for February 25.