Anyone trading USDCAD? Do you think this will retrace?
Depends, if tariffs do get into effect tonight then no, USDCAD will get to 1.50.
If instead Trump finds a deal with Canada within the next 24h then yes, all of this move will be reversed and USDCAD will get to 1.44.
So it’s really up to that story there.
If you think Trump is bluffing to push Canada into the corner to make a quick deal then you fade this.
Otheriwise… if you think Trump is seriously committed to his tariffs then you should ONLY look for Dollar longs (in general) and in particular USDCAD to get to 1.50.
Any question feel free to ask
Looks like it’s retracing today. Checked the news but didn’t see anything new news-wise…
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This is what I have from one of the newsletters I subscribe to:
Economists say a trade war could be economically ruinous for Canada and Mexico. “Since exports to the US account for around 20% of their GDP, today’s tariffs could plunge both the Canadian and Mexican economies into recession later this year,” Paul Ashworth, Chief North American Economist at Capital Economics, wrote Sunday. Unsurprisingly, Canadian Prime Minister Justin Trudeau said Canada will begin phasing in retaliatory 25% tariffs on $106 billion of US goods. Mexico has similarly promised retaliation, though has yet to share specifics. The European Union, which Trump has threatened with tariffs, says it would retaliate as well.
Meanwhile, US consumers are likely to feel a pinch. According to Yale University’s Budget Lab, the tariffs will likely result in a $1,200 loss in annual purchasing power for the average US household; ING estimates it could be as high as $3,242 for a family of four. You may want to stock up on avocados. Goldman Sachs economists estimate the tariffs could cause a 0.7% increase in core inflation and a 0.4% hit to US GDP. Barclays analysts say S&P 500 company earnings could take a 2.8% hit this year.
On the flip side, one thing seems for sure: A tariff-off is likely to strengthen the US dollar:
- Here’s how the math goes: Tariffs will likely fuel inflationary pressures in the US, keeping interest rates high, and they will likely decrease US demand for costly imports, dragging down foreign currencies and economies overall and thus furthering the USD’s status as a safe haven for investors.
- In fact, investors have been pricing in the dollar-strengething effects of tariffs since Trump’s election; the Bloomberg Dollar Spot Index is up nearly 1% since mid-November, and hedge funds have been loading up on long-dollar bets.
Trump has said tariffs are a means to reshoring American manufacturing. However, most experts say a strong USD is antithetical to kickstarting domestic manufacturing. In a letter to his partners at Key Square sent almost a year ago to this day, now-Treasury Secretary Scott Bessent said exactly as much: “Tariffs are inflationary and would strengthen the dollar — hardly a good starting point for a US industrial renaissance. Weakening the dollar early in his second administration would make US manufacturing competitive.”
I have to say this reminds me of the Tiktok ban drama. I feel like a last minute negotiation will happen…
Yup. @peterma talked about this in the other thread too.
I wonder if there are people out there betting on the outcome of this!
Yes, long CAD is a play now.
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Didn’t enter any USDCAD trades but glad your long CADCHF did well!