USDCAD: open 1.4413, overnight range 1.4367-1.4416, close 1.4376, WTI $73.64, Gold, $2742.95
The Canadian dollar’s pleasant drift higher yesterday ended abruptly because of a spike in risk aversion. The NASDAQ plunged 3.07% and wiped out $1.0 trillion of value from AI companies. Nvidia alone lost about $590 billion, the largest one-day loss for a single currency in history. Even more impressive the amount that Nvidia lost exceed the market cap of Netflix.
The reason, China-based DeepSeek, an AI that manages to do what ChatGPT and others do, but at a far lower cost while being substantially more energy efficient.
The equity market sell-off tricked broad based demand for US dollars and that demand was acerbated by President Trump (who else). Mr Trump said he wants a universal tariff that starts far higher than the gradual increase from 2.5% that incoming Treasury Secretary Scott Bressen is said to favour. Trump went on to say that in the near future he will put tariffs on imports of copper, and steel.
The Canadian dollar suffered even more because Trump has not backed off from his proposed 25% tariff on Canadian imports that would start February 1.
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European equity markets are trending higher, led by a 0.57% gain in the UK FTSE100 index, which has provided a boost to other indexes. In contrast, S&P 500 futures have erased earlier gains and are currently flat. The US 10-year yield remains steady at 4.563%.
EURUSD traded lower in a 1.0419-1.0495 band. The selling pressure stemmed from Trump’s renewed tariff rhetoric. The currency remains under pressure ahead of Thursday’s ECB meeting, where a 25-basis-point rate hike is anticipated alongside dovish forward guidance.
GBPUSD drifted in a 1.2426-1.2500 range. The pair found some support from EURGBP selling, but its direction remains tied to general US dollar sentiment ahead of Thursday’s ECB decision.
USDJPY rallied from 154.49 to155.98 as the tariff narrative outweighed safe-haven demand sparked by yesterday’s AI stock selloff. Renewed tariff threats from Trump drove demand for the US dollar, and expectations that the Fed will hold rates steady at Wednesday’s meeting further supported the pair.
AUDUSD traded in a 0.6243-0.6294 band but with a negative bias due to commodity prices, including iron ore. The move was exacerbated by Trump’s tariff comments. Australian business confidence improved slightly to -2 from -3 in November, and business conditions rose to 6 from 3 but the news did not have much impact.
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