ECB Cuts Rates, Signals Possible End to "Restrictive" Policy

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.4380-1.4590

Euro                 1.4930-1.5150

Sterling            1.7860-1.8080

WTI Oil (opening level) $72.55

The CAD is opening at 1.4480 ( 0.6906 )

Headlines

·    President Trump declared he would impose 25% tariffs on goods from Canada and Mexico this Saturday, a move that could lead to a trade war, causing price surges for consumers and increased costs for American manufacturers reliant on imported materials. However, the scope of the duties remained unclear after Trump declined to say if they, as an example, would also apply to much-needed Canadian oil imports.

·    President Trump later (after above comments on Mexico and Canada) added that he would move forward with tariffs on China as well. He also demanded commitments from BRICS countries that they would not seek to replace the US dollar, saying in a social media post that if they attempted to do so “they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful US Economy. They can go find another sucker Nation.”

·    ECB: after cutting its policy rates 25 basis points yesterday as expected, taking the deposit rate to 2.75%, sources at the ECB cited by Bloomberg suggest that the central bank may stop calling its policy rate “restrictive” after another 25 basis point cut in March as the bank tries to determine the neutral point for policy rates, estimated somewhere between 1.75%-2.5%. The market has fully priced the ECB to take its policy rate some 75 basis points lower through the December meeting this year.

Key Points

·    Equities: Apple beats earnings, IBM +13%; ECB cuts rates, DAX, IBEX hit records

·    Volatility: VIX falls, markets confident ahead of PCE, Apple eases uncertainty

·    Digital Assets: Bitcoin flat, Trump tariffs pressure risk, El Salvador adjusts Bitcoin law

·    Currencies: USD firmer on Trump threats he will impose tariffs this weekend.

·    Commodities: Strong months for sector led by coffee, silver, copper and gold

·    Fixed Income: Weak Q4 growth figures, ECB take European yields lower. US 10-year treasury benchmark survives test of 4.50%