Canadian Dollar Steady Amid Trudeau Resignation Speculation

The Canadian dollar edged up 0.3% to 1.4404 against the US dollar as speculation grew that Canadian Prime Minister Justin Trudeau might announce his resignation. In bond markets, Japanese 10-year yields rose to 1.121%, their highest since 2011, while Chinese yuan weakened to a 16-month low of 7.3286 per dollar amidst falling yields. Investors focused on the upcoming US jobs report and Federal Reserve commentary for further clues on interest rate policy.

Equities

The FTSE 100 fell 0.4% on Friday, marking its sharpest decline in over two weeks. Despite this, it gained 1.4% for the week, achieving its best performance in six weeks. Diageo’s shares dropped 3.9% after the US Surgeon General warned about cancer risks linked to alcohol, dragging the beverages sector down by 3.4%. Energy stocks, however, provided a boost, rising 1.5% as oil prices steadied near a two-month high.

The FTSE 250 edged 0.2% lower on Friday but rose 0.7% for the week, its strongest gain in four weeks. Retail data revealed challenges, with shop footfall dropping 2.2% last year and consumer lending growth hitting its weakest pace since mid-2022.

In the US, stocks ended the week higher on Friday. The Dow Jones climbed 0.8%, while the S&P 500 gained 1.26%, and the Nasdaq advanced 1.77%. However, the S&P 500 recorded its third weekly loss in four.

Tech giants Tesla and Nvidia led gains, while Microsoft rose 1.1% after unveiling plans to invest $80 billion in AI-enabled data centres for fiscal 2025. Alcohol producers saw losses following the US Surgeon General's statements, with Molson Coors falling 3.4% and Brown-Forman declining 2.5%.

US Steel shares slid 6.5% after President Biden blocked its $14.9 billion sale to Japan’s Nippon Steel, citing national security concerns. Economic data provided mixed signals, with the ISM Manufacturing PMI climbing to 49.3, its highest since March, indicating some recovery in the sector.

Richmond Fed President Thomas Barkin expressed optimism about the 2025 US economic outlook, though policy uncertainties surrounding the incoming Trump administration linger.

Trading volumes in both markets remained below average, reflecting the shortened trading week.

Forex & Commodities

The US dollar eased slightly but remained near a two-year peak as traders awaited key US economic data, including December’s nonfarm payrolls report, for further indications of Federal Reserve policy. The Canadian dollar rose 0.36% to C$1.4395 against the US dollar, following reports that Prime Minister Justin Trudeau may soon announce his resignation. Meanwhile, the Chinese yuan weakened to a 16-month low of 7.3289 per dollar, with the People’s Bank of China appearing to stop defending the 7.3 level.

Gold prices held steady at $2,635.39 per ounce as investors awaited US labour market data and Federal Reserve minutes for clues on interest rate policy. US gold futures dipped 0.2% to $2,646.80. The central bank is expected to maintain a restrictive stance to curb inflation, potentially limiting gold’s upside. Spot silver edged down 0.2% to $29.57 per ounce, platinum fell 0.7% to $931.30, and palladium slipped 0.4% to $918.22.

Oil prices retreated slightly from three-month highs, with Brent crude down 0.3% at $76.30 a barrel and US West Texas Intermediate crude also falling 0.3% to $73.77. The strong US dollar, which makes oil more expensive for holders of other currencies, contributed to the decline. Concerns over sanctions on Russian and Iranian oil added pressure, as the Biden administration plans additional measures targeting Russian crude exports. Goldman Sachs projects a decline in Iranian oil output by Q2 2025 due to tighter sanctions under the incoming Trump administration.