Article / 05 March 2018 at 22:57 GMT

US Wrap: Loonie crushed by tariff threat for Canada

FX Trade Strategist /

  • ISM Non-manufacturing and Markit PMI data better than expected. 
  • Trump tweets on tariffs, suggesting Canada will not be exempt 
  • German coalition deals and Italian election results lift EUR 

By Michael O’Neill

NY Focus: A tweet by President Trump at 5:47 am ET, put a NAFTA collapse on the agenda. USDCAD soared, rising from 1.2895 to 1.2999. The President tweeted:

Round seven of the NAFTA talks ended today, and the US representative did not sound optimistic, suggesting bilateral deals could be an option.

EURUSD rallied throughout the session. German political parties finally agreed to a coalition government led by Angela Merkel. The Italian election results were mostly as predicted. (No party won a majority) EURUSD rose from 1.2284 to 1.2347.

Sterling had a good day. Better than expected UK Services PMI data and a report that UK PM May said she was close to a transition deal, lifted GBPUSD to 1.3876 from 1.3804. Brexit concerns led to a retreat to 1.3825.

USDJPY climbed steadily, rising from 105.65 at the open to 106.22 by the close, supported by a rebound in stock prices and a rise in equity yields.

 Is there really steel in Trump's trade proposals? Traders think not. Photo: Shutterstock

Wall Street soared, in part because traders believe Trump’s trade plan is all bluster and a negotiating ploy. House Speaker Paul Ryan expressed concern about the consequences of a trade war - “urging the White House to not advanced this plan”.  

The DJIA rose 1.37%, S&P 500 gained 1.10%, and the NASDAQ climbed 1.0%

WTI oil prices reversed an early morning dip and climbed to $62.76 from $61.13/barrel. Traders ignored an International Energy Agency report that the US would take market share from Opec and instead, focused on the falling greenback.

Tuesday Focus:  The wait for Thursday’s European Central Bank meeting should keep EURUSD inside its recent 1.2260-1.2360 range 

The four-hour USDX chart suggests that although the US dollar may be in a bit of an uptrend, it is still inside the trading band that has contained price action since the middle of January.

USDX 4 hour chart
Source: Saxo Bank 

-- Edited by Adam Courtenay

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

06 March
John Shaw John  Shaw
Wow. If this is the way that the USA treats a long time buddy like Canada.....
Ol' Bone Spurs here best not forget who his friends are in an unfriendly world.
06 March
Michael O'Neill Michael O'Neill
He is 72. He won't be around to reap what he sows
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