EU-RUSSIA: Sanctions Rollover Meeting Pushed To Friday

• EUR/USD: $1.0200(E1.7bln), $1.0220-25(E1.2bln), $1.0250-70(E2.7bln), $1.0300(E1.9bln), $1.0325(E944mln), $1.0400-05(E1.1bln), $1.0430(E1.3bln), $1.0450(E968mln)
• USD/JPY: Y151.75($566mln), Y153.00-15($884mln), Y153.50-70($1.7bln), Y155.30($560mln)
• GBP/USD: $1.2450-60(Gbp579mln)
• AUD/USD: $0.6175(A$775mln), $0.6200(A$1.0bln), $0.6370-75(A$576mln), $0.6550(A$1.3bln)
• NZD/USD: $0.5725-40(N$664mln), $0.5760-70(N$591mln)

Greece has announced it will be looking to sell E250mln of the 3.625% Jun-35 GGB (ISIN: GR0124041758) at its auction tomorrow, February 12.

• USDCAD has been relatively unfazed by tariff announcements over the past two days. At ~1.4315, it’s only 25 pips higher than levels before President Trump first threatened 10% tariffs on steel and aluminium late on Sunday before scaling it up to 25% but not effective until March 12th.
• That lands after the Mar 4th deadline from the thirty-day delay (of 25% universal tariffs except for 10% on energy) that was reached after Canada agreed to bolster border security. That timeline gives the impression that it’s still part of Trump’s negotiation strategy.
• These proposed 25% tariffs would be penal, considering Canadian steel and aluminium related exports were worth up to C$33bn or 1.1% GDP in 2024, although much less than on energy products (5.6% GDP), motor vehicles (2.6% GDP) or consumer goods (2.4% GDP).
• Canada imports of steel and aluminium related imports were worth a non-trivial 0.7% of Canadian GDP. This will clearly be much smaller from a US perspective although the interlinkages can still be painful and with Trump previously focusing on trade imbalances, it suggests a lower likelihood that this particular 25% tariff leg goes ahead (with a Canadian steel & aluminium trade surplus of 0.4% GDP).
• The latest Canadian response is still to be decided (Trudeau yesterday when asked about dollar-for-dollar retaliation: “We hope it will not come to that”).
• See the chart below for the relative sensitivities by sector. Canada clearly has the largest trade surplus in energy products, although the US has proved sensitive to the domestic inflationary angle of imposing heavy tariffs, hence the initial 10% carve-out.
• Autos are next in line, with exports worth 2.6% GDP but this is particularly intertwined with US industry as vehicles pass across the border multiple times in the production process. Indeed, Canada actually has a modest trade deficit with the US worth 0.1% GDP. There wasn't an initial carve-out for this industry but we'd expect strong US lobbying here.
• That leaves consumer goods as the next largest area of Canadian exports to the US, worth 2.4% GDP in 2024 but in net terms a surplus of only 0.6% GDP. This should however already be covered by the current threat of 25% (mostly) universal tariffs and it covers a much broader area of goods compared to Trump's previous more targeted aggrievances such as energy, autos and timber.