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The Canadian dollar did a Ke$ha during the Asian session as it went down and while forex traders yelled “timber!” What’s up with that?!

  • Australian and New Zealand Markets out on Anzac Day holiday
  • BOJ’s Iwata: BOJ simulating exit, but too early to share details to public
  • Japan’s services producer price index gains another 0.8% vs. 0.7% uptick expected in March
  • U.S. to impose stiff lumber tariffs on Canada’s companies
  • Lack of North Korea missile tests boosts risk appetite

Major Events:

U.S. to impose stiff lumber tariffs on Canadian companies – The biggest headline of the hour is U.S. Commerce Secretary Wilbur Ross announcing that the U.S. would impose tariffs – also called duties – ranging from 3% to 24% on five Canadian lumber companies. Meanwhile, the other companies will be saddled with duties of about 20%.

Ross said that the duties would affect $5 billion worth of softwood lumber exports from Canada, which makes up about 31.5% of the U.S. market. The Secretary has admitted that “It has been a bad week for US-Canada trade relations” after negotiations over tariffs imposed on U.S. dairy exports to Canada fell through.

Ross defended the move, saying that the duties are proportionate to the subsidies that the companies received from the government.

If you recall, U.S. lumber producers filed a case against their Canadian counterparts and argued that timber grown on Canada’s public lands are effectively government-subsidized. In contrast, U.S. timber growers use private property.

The Commerce Department shared that the rates won’t be final until September. But the damage has been done and now market players believe that the U.S. has just fired the first salvo in what could be a long and painful trade war between Uncle Sam and its major trading partners.

Overall risk appetite – With Australia and New Zealand’s markets out on holidays, Asian session forex traders were able to extend yesterday’s bullish party.

They also took cues from the U.S. markets, which shot higher on positive risk sentiment and strong earnings announcements.

Traders were also worried that North Korea, which is celebrating the 85th anniversary of the foundation of the North Korean People’s Army, would conduct another missile test. When it was looking like North Korea is saying “pass,” risk sentiment received another boost across the board.

Australia’s A SX 200 is closed for the holiday, but Nikkei is up by 0.91%, the Shanghai index shot up by 0.42%, and Hang Seng popped up by 0.94%.

Market Movers:

CAD – The prospect of increased tariffs on Canada’s lumber didn’t sit well with the Loonie bulls.

USD/CAD shot up by 41 pips (+0.30%) to 1.3552, CAD/JPY dropped to a low of 80.86 before jumping back up to its 81.20 open price, and AUD/CAD popped up by 17 pips (+0.17%) to 1.0235.

JPY – Improved risk sentiment pushed higher-yielding currencies higher, and weighed on the low-yielding yen.

USD/JPY inched 32 pips higher (+0.29%) to 110.03, EUR/JPY jumped by 25 pips (+0.21%) to 119.49, and GBP/JPY climbed by 28 pips (+0.20%) to 140.60.

Watch Out For:

  • Italy’s markets out on Liberation Day holiday
  • 8:30 am GMT: U.K. public sector net borrowing (2.6B EUR expected, 1.1B EUR previous)