Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3690-1.3940
Euro 1.6020-1.6270
Sterling 1.8510-1.8760
WTI Oil (opening level) $56.97
The CAD/USD is opening at 1.3811 ( 0.7241 )
USD/CAD pair trades near 1.3810. A fall in crude oil prices exerts some selling pressure on the commodity-linked CAD against the USD. While traders brace for the US economic data for clues about the timing of potential interest rate cuts by the Fed.
Trump said on Tuesday that Venezuela will be turning over 30 million to 50 million barrels of sanctioned oil to the US. If Venezuelan oil replaces some Canadian supply, requires a reassessment of previously bullish 2026 CAD view. It’s worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD.
Keep in mind, dovish comments from Fed policymakers could drag the USD lower.
Fed Governor Miran said he expects incoming data to continue signaling that rate cuts are appropriate, warning that keeping policy too tight could “nip growth in the bud,” while adding that he remains optimistic about the broader economic outlook. Meanwhile, Minneapolis Fed President Kashkari stated that he sees a risk that the jobless rate could "pop" higher.
Headlines
· China announced export controls for “dual use” (civilian-military) exports to Japan, which could impact some 40% of overall exports to the country. This is an escalation of a conflict that started after Japan’s PM Takaichi said that it would view a Chinese invasion of Taiwan as a direct threat to Japan’s security. Japan responded angrily to the move.
· Australia November CPI out Wednesday was somewhat softer than expected on the headline ata 3.4% YoY versus 3.6% expected and 3.6% in October, while the “trimmed mean” measure came in at 0.3% MoM and 3.2% YoY as expected and vs. 3.3% in October.
· Germany's inflation rate dropped to 1.8% in December 2025, below November’s 2.3% and forecasts of 2.0%. Goods inflation fell to 0.4%, while services stayed high at 3.5%. Core inflation hit its lowest since June 2021 at 2.4%. The EU-harmonized CPI was at 2.0%, its lowest since July.
· UK new car sales rose 3.9% year-on-year to 146,249 units in December 2025, driven by private and business buyers despite a fleet decline. Diesel and petrol sales fell, while new energy vehicles exceeded half the market. PHEVs surged 32.9%, BEVs up 8.0%, and hybrids grew 3.0%.
· China's central bank plans to cut the reserve requirement ratio and interest rates in 2026 to maintain liquidity and loose monetary policy. The PBOC aims to expand domestic demand, manage financial risks, boost credit in services, provide liquidity for non-banking institutions, and stabilize the yuan.
· The S&P Global Canada Services PMI rose to 46.5 in December 2025 from 44.3 in November, still contracting. Business activity and new orders fell, with employment cuts ongoing. Despite weak demand, high wage costs prompted price hikes. Inflation increased slightly, and firms remained cautiously optimistic amid tariff and policy concerns.
· Trump said Venezuela will transfer 30–50 million barrels of sanctions backlogged oil to the US, with the crude sold at market value and proceeds shared between the two countries. The move is widely seen as a setback for China, Venezuela’s former top buyer, and may prompt Beijing to reassess its reliance on Latin American energy supplies.
· Fed’s Governor Stephen Miran said the US central bank will need to cut interest rates by more than a percentage point in 2026, arguing monetary policy is restraining the economy. Other officials just this week said that interest rates may now be close to neutral level, highlighting a potential battle ahead.
Key Points
· Equities: Record highs in the US and Europe, while China-led Asia rallies, but energy and geopolitics keep investors alert.
· Volatility: Volatility remains low, but dense U.S. data and Friday’s jobs report keep downside protection in demand despite calm equity markets
· Digital assets: bitcoin cautiously softer, ethereum firmer, ETF flows and macro data expectations steer sentiment
· Currencies: US dollar mixed, Japanese yen attempts rebound in Tokyo session
· Commodities: Gold and silver slip ahead of index rebalancing; crude falls on Venezuela supply; copper hits record
· Fixed Income: US Treasuries stuck in range. Japanese long bond yields hit new multi-decade highs.