Markets React as Trump Eyes Gaza, Japan’s Wages Surge, and US Suspends China Packages

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

US Dollar        1.4200-1.4400

Euro                 1.4770-1.5000

Sterling            1.7800-1.8000

WTI Oil (opening level) $71.92

The CAD is opening at 1.4389 ( 0.6998 ) 

Headlines 

·    President Trump declares “maximum pressure” policy against Iran, also says US should “take over” the Gaza strip, saying that Palestinians should leave it and be “resettled” permanently. “The US will take over the Gaza Strip, and we will do a job of it, too. We’ll own it and be responsible for dismantling all of the dangerous unexploded bombs and other weapons on the site.” He said in a press conference with Israel’s Benjamin Netanyahu.

·    Japan’s wage data for December comes in far stronger than expected overnight, with the Y/Y Cash Earnings figure hitting +4.8% versus +3.7% and the November data revised up to 3.9% vs. 3.0% originally reported. The “Same Sample Base” data was up 5.2% versus 3.6% expected, while Real Cash Earnings rose +0.6% YoY vs. -0.1% expected.

·    The US Postal Service will temporarily suspend inbound international packages from China and Hong Kong Posts, which will block shipments from Chinese retailers, including giants like Shein and PDD Holding’s Temu. The stop comes after Trump slapped 10% tariffs on all imports from China, and revoked the “de minimis” exception that formerly allowed packages with a value under USD 800 to be sent without tariffs. There were four million “de minimis” packages sent per day in 2024, according to a Morningstar analyst.

Key Points

·    Equities: Google and AMD push US futures down in late trading, Europe gains, DAX rebounds

·    Volatility: VIX down 8% yesterday; VIX futures up 2.6% this morning

·    Digital Assets: BTC < $100K, crypto stocks mixed, US sovereign wealth fund crypto speculation

·    Currencies: US dollar weakens on sense Trump tariffs are negotiating tactic more than trade war threat. JPY sharply higher overnight non wage data.

·    Commodities: Sector reaches a 24-month high as broad rally continues

·    Fixed Income: US treasuries find buyers late yesterday with US 10-year eyeing key 4.50%

·    Macro events: US Jan. ADP Employment Change, US Dec. Trade Balance, US Jan. ISM Services, US Fed’s Bowman to speak.