FOREX: CAD & MXN Get Late Boost on Tariff Implementation Extension
Feb-26 18:20
- Headlines after the European close on Wednesday have sparked currency markets into life, as President Trump has announced that tariffs on Mexico and Canada will now be implemented on April 02, later than the prior March 04 deadline.
- The extension to this deadline has provided optimism, and the Canadian dollar and Mexican peso have rallied as a result. USDCAD fell from 1.4360 to 1.4300, while USDMXN fell from 20.47 to 20.29 lows.
- Optimism has been tempered since, as markets digest the headlines. Although the extension could be seen as providing more time to negotiate broader trade deals, Trump mentioning that the US is “not stopping the tariffs” is offsetting the initial price spikes.
- In contrast, President trump took a firmer stance on the EU, stating that the decision on tariffs on the EU is 25% and that details will be “coming soon”. This prompted some volatility for the single currency, with EURUSD slipping from key resistance around 1.0530 to 1.0485 in short order. EURCAD was also sharply lower on the contradictory sentiment, trading the entire day's range in quick fashion, from 1.5095 to 1.5010 lows.
- Overall on the session, AUD and NZD have exhibited underperformance as risk sentiment continues to cautiously tread water. Additionally, lower than expected inflation data in Australia as well as potential flows related to value date month-end may have weighed on AUDUSD, which hit intra-day lows of 0.6300. Attention below here is on 0.6231, the Feb 10 low.
- GBP trades more healthily, and cable has traded back above 1.27 for the first time since December 18, keeping a bullish trend condition intact. In similar vein, EURGBP has been edging lower to levels around 0.8265 at typing. The cross continues to narrow the gap towards 0.8203, the Mar 7 ‘22 low and a lowest point of a multi-year range.
- Swiss GDP and Spanish HICP inflation cross tomorrow in Europe, before the 2nd reading of US GDP is scheduled, alongside jobless claims and durable goods data.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FOREX: Safe Haven FX in Favour as Equities Consolidate Session Declines
Jan-27 18:18
- 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: Schlegel Sticking To Prior Rhetoric But STIR Prices In More Easing
Jan-27 18:09
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.
US TSYS/SUPPLY: Review 5Y Note Auction: Modest Stop-Through
Jan-27 18:06
- 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.
