The Canadian dollar rose amid Trudeau’s resignation. The Mexican peso became one of the most dynamic currencies in 2024

At the end of Monday, the Dow Jones Index (US30) was down 0.06%. The S&P 500 Index (US500) added 0.55%. The Nasdaq Technology Index (US100) increased by 1.09%. The S&P 500 (US500) and Nasdaq (US100) indices gained thanks to gains in chipmakers and positive market sentiment ahead of a key December Nonfarm Payrolls report due out later this week. The semiconductor sector rallied sharply yesterday, especially after Nvidia’s server manufacturing partner Foxconn reported record earnings and an optimistic sales outlook. Market sentiment was boosted by a Washington Post report that President-elect Trump’s tariff plan will be narrower than expected, which could ease global trade tensions.

The Canadian dollar strengthened to 1.43 per US dollar, rebounding from January 2016 lows reached earlier this month. Traders reacted to Prime Minister Trudeau’s resignation and news that President Trump rejected reports of less stringent tariffs. Trudeau’s departure followed mounting crises including threats of tariffs, resignations of key allies and falling approval ratings, marking the end of his nine-year tenure as prime minister and potentially setting the stage for a snap election. Opinion polls currently favor conservatives, who favor tax cuts and maintain closer ties to Trump.

The Mexican peso strengthened to 20.36 per US dollar, recovering from a March 2022 low, driven by speculation over President-elect Donald Trump’s tariff policies. Reports suggest a more targeted approach, focusing only on imports deemed critical to US national or economic security, easing market concerns. In addition, the peso’s rally has been bolstered by reduced risk aversion and growing optimism about Mexico’s economic outlook. This has made the peso one of the most dynamic emerging market currencies.

Equity markets in Europe mostly rose on Monday. Germany’s DAX (DE40) rose by 1.56%, France’s CAC 40 (FR40) closed 2.24% higher, Spain’s IBEX 35 (ES35) gained 1.34%, and the UK’s FTSE 100 (UK100) closed positive 0.31%. In Europe, data showed that German inflation unexpectedly rose to 2.9% in December, beating estimates of 2.6%, adding to fears of continued price pressures. The data reinforced expectations that the European Central Bank (ECB) would be cautious about cutting interest rates.

WTI crude oil prices fell by 0.5% on Monday, breaking a five-day streak of gains, after the US dollar cut losses and weak economic data from the US and Germany cast a shadow over the demand outlook. A weaker dollar usually makes oil cheaper for buyers using other currencies.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) fell by 1.47%, China’s FTSE China A50 (CHA50) declined 1.15%, Hong Kong’s Hang Seng (HK50) lost 0.36%, and Australia’s ASX 200 (AU200) was positive 0.08%. The declines in Hong Kong were mainly led by the consumer and technology sectors, with Tencent Holdings falling nearly 5% after the US blacklisted it along with CATL Co. over alleged ties to the Chinese military. The move came just weeks before Donald Trump took office.

In 2024, the Australian dollar fell the most in six years, but its decline seems far from over — there is a chance it will fall below 60 US cents in the coming months. Since late September, the Australian dollar has suffered from deteriorating global risk sentiment and growing expectations that the Reserve Bank of Australia (RBA) will be forced to cut interest rates. Another negative factor is the prospect of a trade war between the US and China, Australia’s largest trading partner.

The New Zealand dollar rose to around $0.565 on Tuesday after rising 0.6% in the previous session. The kiwi received support from strong service sector activity data as well as additional support from China, New Zealand’s largest trading partner. However, domestic factors continue to weigh on the currency amid expectations of aggressive monetary policy easing by the Reserve Bank of New Zealand. The RBNZ is expected to cut the 4.25% monetary rate by 50 bps at its February meeting.