15 Jan 2025

• USD/CAD depreciated following reports of the incoming Trump administration considering gradual tariff hikes.
• Canada’s employment figures have lowered expectations for near-term interest rate cuts by the Bank of Canada.
• The US Dollar depreciated following the disappointing US December PPI data; CPI inflation data will be eyed on Wednesday.
• USD/CAD remains stable following two consecutive days of declines, trading at approximately 1.4360 during the Asian session on Wednesday. The recent downturn in the USD/CAD pair can be linked to a more favorable outlook for foreign currency inflows, alleviated concerns regarding US trade, and heightened expectations for the Bank of Canada (BoC).
  
  The release of stronger-than-anticipated Canadian labor market data for December has lessened the likelihood of imminent interest rate reductions by the BoC. In December, employment in Canada increased by 91,000, representing the most significant rise since January 2023. Furthermore, the unemployment rate fell to 6.7%, a decrease from 6.8% in the prior month.
• Reports indicating the gradual introduction of proposed import tariffs by the incoming Trump administration have alleviated concerns for Canadian exporters, resulting in increased demand for the Canadian Dollar (CAD).
  
  The US Dollar Index (DXY), which assesses the performance of the US Dollar against six major currencies, is currently trading around 109.20. The Greenback encountered difficulties following the disappointing Producer Price Index (PPI) data for December. Market participants are expected to monitor the upcoming Consumer Price Index (CPI) inflation data, scheduled for release later on Wednesday.
  
  In December, the US Producer Price Index for final demand increased by 0.2% month-over-month, following a 0.4% rise in November, which was below the anticipated 0.3%. Year-over-year, the PPI rose by 3.3% in December, marking the highest increase since February 2023, after a 3.0% rise in November. This figure fell short of the consensus estimate of 3.4%.