North American FX Open - Trump returns to power

So today sees Donald Trump return to the White House with his second inauguration taking place around midday. Markets remain on tenterhooks to see what first day announcements Trump will make. Sources suggest the President-elect is poised to invoke emergency powers as part of his plan to unleash domestic energy production, while seeking to reverse President Joe Biden’s actions to combat climate change. For most the main focus is on what will be introduced in terms of tariffs. Remember today is also a US holiday, MLK Day.

The Dollar has conceded ground overnight heading into the inauguration.

Overnight, the PBOC kept its one-year and five-year loan prime rates unchanged, as expected, but near-term RRR cut speculation continues unabated.

In the UK, the Rightmove House Prices rose by 1.8% y/y in January, their highest reading since March 2023.

Meanwhile, the ECB's Holzmann stated that an ECB rate cut later this month, is not a foregone conclusion and that the central bank risks damage to its credibility if it cuts when CPI is rising.

EZ Construction Output rose by 1.2% m/m in November and 1.4% y/y.

Usd/Cad remains buoyant after last Friday's gains. The contest to become the next Liberal Party leader and therefore the next Canadian PM has heated up with Chrystia Freeland launching her campaign over the weekend. Former Finance Minister in former PM Trudeau's government, Freeland claimed that she was the best candidate to deal with Trump. It looks like being a battle between Freeland and Mark Carney for the top job, but with a federal election having to take place on or likely well before October 20th, and with the Liberal Party way behind in the polls, it is unclear as to how much of an impact Freeland or Carney will have.

There is no US data of note, but we do receive the Bank of Canada's Q4 Business Outlook survey, which will be closely watched for clues ahead of next week's BoC monetary policy decision.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.