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The U.S. currency made a bit of a comeback against most of its rivals on signs that the Trump administration could either temper or delay their proposed increase in tariffs.

  • ADP non-farm employment change up by 235K vs. 199K forecast
  • Canada’s trade deficit narrowed from 3.1B CAD to 1.9B CAD
  • Canadian labor productivity up by 0.2% vs. 0.5% forecast in Q4 2017
  • U.S. trade deficit widened from $53.9B to $56.6B
  • BOC kept interest rates unchanged at 1.25% as expected
  • U.S. EIA crude oil inventories up by 2.4M barrels vs. 2.6M forecast
  • New Zealand manufacturing sales up 2.8% vs. 0.5% previous in Q4 2017

Major Events/Reports:

Tariff exemptions for Canada and Mexico?

Following top economic adviser Gary Cohn’s resignation announcement earlier this week, the White House announced that the proposal to increase tariffs for steel and aluminum imports will be signed before the end of the week.

Investors seemed to take comfort in the chance that Mexico and Canada could be exempted from these, easing fears of a full-blown trade war with Uncle Sam’s closest trading buddies. A White House spokesperson said:

“We expect that the President will sign something by the end of the week and there are potential carve-outs for Mexico and Canada based on national security, and possibly other countries as well based on that process.”

Still, the plan is to impose a duty of 25% on steel and 10% on aluminum to put cheap imports (cough, China, cough) at a disadvantage, which still puts the U.S. at risk of retaliation from other trade partners.

BOC kept rates unchanged

As expected, BOC head honcho Poloz and his fellow policymakers decided to keep rates on hold at 1.25%. Although the central bank acknowledged the positive developments in the global and domestic economy, officials took a jab at the Trump administration for ushering in some uncertainty.

“Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.”

The BOC also noted that GDP growth was slower than expected in Q4 last year mainly due to higher imports on stronger business investment. It also highlighted how inflation is running close to their 2% target and that core measures of price levels have edged higher.

As for the jobs market, the BOC mentioned that “Wage growth has firmed, but remains lower than would be typical in an economy with no labour market slack,” adding that temporary factors are causing inflation to fluctuate.

The central bank concluded that “some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.”

Mostly upbeat U.S. data

Uncle Sam’s reports were mostly in the green, starting off with the better than expected ADP non-farm employment reading at 235K for February and and upgrade in the earlier figure to 244K.

However, the trade balance came in weaker than expected as the deficit widened from $53.9B to $56.6B. Components of the report revealed that exports fell $2.7 billion in January while imports dipped by $0.1 billion.

Soon after the Beige Book featured a slightly more upbeat assessment of the economy from the Fed districts. They acknowledged that growth expanded at its moderate pace from January to February and that employment grew moderately as well.

Officials also noted that labor market tightness is observed in most districts, putting upward pressure on wages. Price levels are also higher in most districts but consumer spending was mixed.

U.S. equity indices bounced off their intraday lows right around the time of this release but still mostly ended in the red:

  • Dow 30 index is down 82.76 to 24,801.36 (-0.33%)
  • S&P 500 index is down 1.32 points to 2,726.80 (-0.05%)
  • Nasdaq is up 24.64 points to 7,396.65 (+0.33%)

Major Market Mover(s):


The dollar managed to pare its losses from the previous sessions on a couple of positive economic releases and reports that Trump could allow exemptions in higher tariffs.

USD/JPY found support at 105.54 then rallied to 106.21, USD/CHF recovered to .9437, EUR/USD retreated to a low of 1.2384, and AUD/USD is down to a low of .7792.


The Loonie also found a bit of reprieve on a smaller than expected build in U.S. oil stockpiles, a relatively positive BOC statement, and the likelihood of Canada being exempted from higher tariffs.

USD/CAD held on to the 1.2915 area, CAD/JPY bounced off a low of 81.41 to 82.22, EUR/CAD retreated to the 1.6000 handle, and GBP/CAD is down to a low of 1.7921.

Watch Out For:

  • 12:30 am GMT: Australia’s trade balance (0.21B AUD expected, -1.15B AUD previous)
  • Tentative: Chinese trade balance (-70B CNY expected, 136B CNY previous)
  • 5:00 am GMT: Japanese Economy Watchers Sentiment index