POLITICAL RISK: Trump-Trudeau Call Ended On A "Somewhat" Friendly Manner
US President Trump offers his take of today's call with Canadian PM Trudeau, saying it ended ended on a "somewhat" friendly manner. The below are taken from Truth Social:
- "Justin Trudeau, of Canada, called me to ask what could be done about Tariffs. I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it’s gotten better, but I said, “That’s not good enough.” The call ended in a “somewhat” friendly manner! He was unable to tell me when the Canadian Election is taking place, which made me curious, like, what’s going on here? I then realized he is trying to use this issue to stay in power. Good luck Justin!"
- "For anyone who is interested, I also told Governor Justin Trudeau of Canada that he largely caused the problems we have with them because of his Weak Border Policies, which allowed tremendous amounts of Fentanyl, and Illegal Aliens, to pour into the United States. These Policies are responsible for the death of many people!"
Wires report Canadian sources as saying discussions will continue today. This follows the one-month delay for auto tariffs announced earlier today, as previously hinted by Lutnick on the grounds that they are USMCA compliant. Auto production is particularly intertwined with US production lines, meaning tariffs there would be particularly damaging for all parties.
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US TSY FUTURES: Heavy Buying on Latest Tariff Headlines
- Treasury futures see heavy round of buying last couple minutes, over 50,000 TYH5 from 109-02 to -05.5, pushing total volume to 2.2M for the contract, following the latest tariff headlines where Pres Trump said he "had good talk with Trudeau".
- Less positive, Trump follows with "E’RE NOT TREATED WELL BY CANADA WE DON’T NEED CANADIAN CARS, LUMBER, AGRICULTURE WOULDN’T MIND MAKING OUR CARS IN THE UNITED STATES" Rtrs.
- "HAVEN’T AGREED WITH MEXICO ON TARIFFS YET" Bbg after earlier headlines noted delay of tariffs to early May.
- The TYH5 contract trades 109-05 last, off early session high of 109-15.5, through initial technical resistance of 109-10.5 (50-day EMA), next level 109-31 (High Dec 18).
EURUSD TECHS: Fresh Cycle Low
- RES 4: 1.0533 High Jan 27 and a key resistance
- RES 3: 1.0450 50-day EMA
- RES 2: 1.0350 Low Jan 31 and a gap high on the daily chart
- RES 1: 1.0335 High Feb 3
- PRICE: 1.0304 @ 16:44 GMT Feb 3
- SUP 1: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 2: 1.0031 2.00 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 3: 1.0000 Psychological round number
- SUP 4: 0.9947 76.4% of the Sep 28 ‘22 - Jul 18’23 bull leg
EURUSD is trading in a volatile manner. Monday’s gap lower and fresh cycle low, highlights a resumption of the downtrend. Moving average studies are in a bear-mode position and attention is on 1.0138, the 1.764 projection of the Sep 25 - Oct 23 - Nov 5 price swing. Clearance of this level would open 1.0031, the 2.00 projection. Initial resistance is at 1.0335, Monday’s intraday high and a gap low on the daily chart.
CANADA: Intermeeting BoC Cut Prospects Look Unlikely [2/2]
- i) Any intermeeting cut would likely be larger than 25bp otherwise it’s hard to justify, but such a move when coming as a complete surprise would risk a further slide in the Canadian dollar as investors see the BoC panicking. USDCAD has pulled back to 1.4600 (~100 pips of which came following the Mexico news) after almost touching 1.48 overnight for highs since 2003.
- ii) The Bank has in its words cut a “substantial” 200bp since June which have started to support the economy. It’s taken the overnight rate target to 3% for within the 2.25-3.25% estimated range for neutral (a rate that has a chance of being revised higher again in the April MPR when it’s set for its annual estimation).
- iii) Last week’s 25bp cut was painted as a risk management approach in the face of tariff uncertainty whilst Governor Macklem also pointed to a stepping up of outreach activities with businesses and households to see how they were responding to any potential tariffs in real time (MNI BoC Review from the Wed decision here:).
- iv) Canadian government retaliation keeps an inflation angle at play, pushing for 25% tariffs on C$155bn of US goods (C$30bn effective Tue before the remaining C$125bn in three weeks to allow businesses time to prepare).
