The markets are off to a volatile start this Tuesday, with significant developments driven by political rhetoric and macroeconomic factors. One of the standout stories today centers on the Canadian dollar, which has been rocked by comments from former US President Donald Trump. Alongside this, we see mixed trends in indices, persistent weakness in commodities, and the looming influence of upcoming US data releases.
The macro calendar today is relatively light during the European session, leaving traders focused on the CB Consumer Confidence report and FOMC Meeting Minutes, both set to be released during the American trading hours. These events are expected to provide further insights into consumer sentiment and the Federal Reserve’s monetary policy stance, adding to the market’s cautious mood.
The Canadian dollar experienced sharp volatility overnight following Trump’s announcement of potential trade tariffs. Trump declared, “As one of my first executive orders, I will charge Mexico and Canada a 25% tariff on all products coming into the US.” This triggered an immediate sell-off in the Canadian dollar, which remains the weakest currency today despite a minor recovery during the Asian session. The threat of such tariffs, though speculative, casts a shadow over North American trade relations and weighs heavily on the loonie’s outlook.
In contrast, the American dollar is showing resilience and currently leads alongside the Japanese yen and New Zealand dollar as the strongest currencies. This divergence highlights the market’s risk-off tone, particularly with heightened geopolitical risks from the ongoing tensions in Eastern Europe.
The indices are painting a divided picture. European markets are struggling, with major indices trading in the red and slipping below key support levels, reflecting broader negative sentiment. Conversely, US indices, led by sectors such as small caps, are showing green across the board. The Russell 2000 had a strong session yesterday, but early trading today suggests a slight pullback as traders take profits. European indices, however, face a tougher road, with bearish momentum appearing stronger.
Commodities are also under pressure, with gold and silver extending their losses from yesterday. Both precious metals have been weighed down by a combination of rising yields and a stronger dollar, with palladium and platinum also joining the downward trend. Oil, which fell sharply yesterday, is attempting a recovery, but the overall sentiment remains negative, keeping gains in check.
With Thanksgiving week underway, trading activity is expected to wane in the second half of the week as US markets observe the holiday. Lower liquidity could amplify volatility in thinly traded markets, but for now, the focus remains on the day’s events, particularly the CB Consumer Confidence report and the FOMC Meeting Minutes, which will guide sentiment heading into the midweek sessions.