Tariff Tensions Rise as Trump Plans April 2 Announcement

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

US Dollar        1.4210-1.4450

Euro                 1.5410-1.5630

Sterling            1.8440-1.8660

WTI Oil (opening level) $68.84

The CAD/USD is opening at 1.4317 ( 0.6984 )

·    Liberal leader Mark Carney set an election for April 28, with a close race between Liberals and Conservatives. The campaign will focus on Trump's tariffs and annexation threats, uniting Canadians. Carney and Conservative leader Pierre Poilievre both promise tax cuts but differ on economic and US relations.

·    We will likely see the USD/CAD trading in the same range until the election is over. The interest rates in Canada are lower than the USA - so that is not going to attract investment in our currency. Oil prices are low, as Trump wants a lower price to cut the cost of gas at the pumps for Americans, as well as to replace the strategic oil reserve that Biden used up and said he would replace when oil was back at $67. Market sentiment towards the Canadian trade (imports and exports) with USA -during the election- will be muted while the talk of tariffs . So after the election is over then look for a move out of the current 1.42-1.45 range.

Headlines

·    France wants the EU to use its anti-coercion instrument against the US if Trump uses tariffs to unfairly pressure the bloc. This instrument allows retaliatory measures like trade restrictions and control over investments. The European Commission is not currently considering it, and discussions await the US tariffs announcement on April 2. 

·    Trump is set to announce "reciprocal tariffs" on April 2., targeting countries with tariffs on US goods, excluding some. They will take effect immediately, potentially straining ties with allies, but no sector-specific tariffs are planned. The scope is narrower than initially planned, with some countries exempt and existing metal tariffs possibly not cumulative.   

·    Chinese Premier Li Qiang says China is ready for "unexpected shocks" as Trump plans more tariffs. Li urges market openness and resource-sharing amid rising instability. He pledged interest rate cuts and support to ensure economic stability.

Key Points

·    Equities: Tariff flexibility boosts US stocks; earnings outlook remains weak; Europe lower on growth worries; mixed Asian markets

·    Volatility: VIX below 20; cautious sentiment around economic data releases; lower immediate tariff risks

·    Digital Assets: Bitcoin and altcoins rise; crypto equities mixed; cautious optimism prevails

·    Currencies: USD trades higher, supported by short covering ahead of 2 April tariffs

·    Fixed Income: Treasury yields firming up

·    Commodities: Another shallow gold correction. Crude trades steady