The Canadian dollar has moved significantly today, trading in a 220 pips range. The pair rose to a year-to-date high of 1.4485 on concerns that President Trump could impose first-day tariffs of up to 25% on Canada, sparking retaliation and a trade war.
But the WSJ report emphasized that President Trump only plans to sign a memo calling for investigations into trade practices in Canada, Mexico and China. This is the best-case scenario so far, but President Trump could change everything.
Following this report, USD/CAD fell sharply, hitting a low of 1.4262. It returned to the December 17th level, but has since rebounded to 1.4327.
Daily USD/CAD
Part of the reason for the surge is uncertainty about what will actually happen. It is difficult for countries like Canada to accept trade disputes and other currencies that are the focal point, as they cannot avoid trade disputes for four years. That said, it's a great start.
Also keeping the craziness in check here is that WTI crude oil fell $1.42 to $76.46. Tariff premiums are building up on oil as buyers stuff pipelines and tankers to get ahead of potential tariffs. There were also threats from Canada and Mexico to cut off supplies in response to tariffs.
We'll wait for the next Trump headline to see what happens next, but I think this is a good sign of a tentative low for the lunatics. President Trump has had months to think about tariffs on Canada, and I don't think he'll change his mind tomorrow (although the threats will continue).
