FOREX: CAD & MXN Weaken On Tariff Threat, Yen Outperforms

The USD BBDXY index sits up 0.25% for the first part of Tuesday trade, last near 1288.2. We are off earlier highs in the index though, which printed at 1293.55 (which was also just short of recent YTD highs close to 1295). 

• Broader risk sentiment has stabilized somewhat after the earlier headlines around 25% tariffs on Canada and Mexico, along with an additional 10% tariff on China, drove sharp risk off moves in the FX space.
• USD/CAD got to fresh multi year highs of 1.4178, but we sit back closer to 1.4100 in latest dealings, still around 0.80% weaker in CAD terms. USD/MXN is up over 1% to 20.53, but is off earlier highs of 20.7504. USD/CNH got above 7.2700, but sits back at 7.2635 in latest dealings.
• US equity futures are back to being modestly in the green, Eminis were off at one stage by 0.60%. Regional equity sentiment is mixed, with Hong Kong and China markets up at the lunch time break. Fresh US tariffs may evoke fresh stimulus from the authorities. US yields are up, but away from best levels for the session.
• USD/JPY is tracking under 154.00, last near 153.75/80, up around 0.30% in yen terms. Yen is the only G10 currency firmer against the USD so far today. The early risk off tone on tariff headlines was supportive, although equity markets are away from worst levels. The other positive was the firmer PPI services print, which reinforces the live nature of the upcoming Dec BoJ meeting.  
• We also had comments from PM Ishiba, stating he wanted bigger wage gains next year compared to this year.
• The A$ got to lows of 0.6434, but sits back at 0.6490/95 in latest dealings, only down modestly for the session. NZD/USD touched sub 0.5800 (fresh YTD low), but is back to 0.5840/45 now, close to flat.
• AUD/JPY got to lows of 99.07, but sits back at 99.85/90 now.
• Later the FOMC November meeting minutes are published and the ECB’s McCaul and BoE’s Pill speak. US September house prices, October new home sales, November consumer confidence and November Richmond, Philly and Dallas Fed indices print.