What’s happening: The Canadian dollar rose this morning, after the country’s Prime Minister announced his resignation.
What happened: PM Justin Trudeau had been under pressure to resign, ahead of general elections later this year.
Markets also responded to economic data released on Tuesday.
Why it matters: Canadian Prime Minister Justin Trudeau announced his resignation late on Monday, with the Liberal Party polling badly ahead of the country’s general elections scheduled for later this year.
While the Liberal Party faced increasing internal discord, opinion polls strongly favoured the Conservative Party, led by Pierre Poilievre.
Trudeau ‘s resignation as the leader of the Liberal Party effectively ends his nine-year tenure as Canada’s Prime Minister.
Justin Trudeau had been facing significant pressure from his party colleagues due to his growing unpopularity both at home and internationally. As the latest blow, US President-elect Donald Trump threatened steep tariffs on Canada, while suggesting the country joined the US as its 51st state and referred to Trudeau as Governor instead of Prime Minister.
Data released on Tuesday showed the Ivey Purchasing Managers Index in Canada rising to 54.7 in December, from 52.3 in the previous month. Although the index fell short of market estimates of 55.4, the reading signalled that the region’s economic growth had remained steady for the fourth month in a row.
Canada’s trade deficit narrowed to C$0.32 billion in November, from C$0.54 billion in the previous month and came in better than market estimates of a C$0.9 billion deficit.
Strength in the price of crude oil, one of Canada’s major exports, lent support to the loonie. WTI crude oil prices jumped 0.5% to trade at $74.60 a barrel this morning.
However, a higher US dollar limited the overall gains for the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose slightly to 108.60.
The CAD/USD forex pair rose 0.15% to 1.4349 this morning. The S&P/TSX Composite Index fell 0.28% to close at 24,929.89 on Tuesday.
What to watch: Investors await the release of jobs data from Canada on Friday. The unemployment rate in Canada, which rose to 6.8% in November from 6.5% in the previous month, is expected to rise further to 6.9% in December.
Analysts expect employment in Canada to increase by 25,000 in December, following a 51,000 gain in November, while average hourly wages are projected to grow by 3.9% year-over-year in December.
Context: The STOXX Europe 600 Index climbed to its strongest level in three weeks, with markets monitoring the impact of rising inflation on the central bank’s monetary policy.
Details: European stocks had remained under pressure last year, struggling to keep pace with their global rivals, due to fears of US tariffs, a slowdown in the economy and political turmoil in France and Germany.
However, Deutsche Bank on Tuesday raised its outlook on European stocks to Overweight, citing the significant valuation gap between them and US stocks.
The latest economic data showed annual inflation rising for a third consecutive month to 2.4% in December, from 2.2% in November, in-line with market estimates, amid a rebound in energy costs.
Median inflation expectations for the Eurozone for the next 12 months rose to 2.6% in November, from 2.5% in October, accelerating for the second month in a row.
However, markets are still pricing in four interest rate cuts by the European Central Bank of 25bps each for 2025, to stimulate the economy.
The unemployment rate remained at record low levels of 6.3% in November, unchanged from the previous month. The HCOB Eurozone construction PMI rose to 42.9 in December, from 42.7 in the previous month. This was the 32nd straight month that the region’s construction activity remained in the contraction zone.
Energy shares rose around 0.8% on Tuesday, with Frontline’s stock surging more than 7%. However, healthcare and banking shares fell sharply during the session.
Shares of Next gained around 3.7% on Tuesday, after the UK-based clothing retailer raised its annual profit forecast.
The STOXX Europe 600 Index gained 0.32% to close at 514.67 on Tuesday. Germany’s DAX 40 gained 0.62% to 20,340.57, while France’s CAC 40 added 0.59% to reach 7,489.35. The FTSE 100 bucked the trend and slipped 0.05% to settle at 8,245.28.
What to watch: Investors await the release of economic data on consumer confidence (1400 UAE Time), economic sentiment (1400 UAE Time) and PPI (1400 UAE Time) from the Eurozone today.
Analysts expect consumer confidence in the Eurozone to decline by 0.8 points to a reading of -14.5 in December. The Economic Sentiment Indicator is projected to decline to 95.6 in December, from 95.8 in November. Producer Prices in the Eurozone, which fell 3.2% year-over-year in October, are expected to decline by 1.3% in November.
Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.42%, 1.11% and 1.79%, respectively.
Russia’s Ministry of Defence claimed that its military forces had captured the village of Dachenske, a major city in the Ukraine’s Donetsk region. The news sent the RUB/USD pair slightly higher in forex trading this morning.
Australia’s monthly Consumer Price Index rose by 2.3% year-over-year in November, following a 2.1% rise in the previous two months. The latest reading coming in higher than market estimates of 2.2% exerted pressure on the AUD/USD forex pair.
South Korea recorded a current account surplus of $9.3 billion in November, higher than the year-ago surplus of $3.89 billion, which sent the KRW/USD pair higher in forex trading this morning.
UK’s S&P Global construction PMI declined to 53.3 in December, from 55.2 in November. However, construction activity remaining in the expansion zone sent the GBP/USD forex pair higher this morning.
The American Petroleum Institute said that US crude oil inventories fell by 4.022 million barrels in the week ending January 3, compared to a decline of 1.44 million barrels in the previous week, which sent the WTI crude oil prices higher this morning.
Eurozone’s industrial sentiment (1400 UAE Time), selling price expectations (1400 UAE Time) and services sentiment (1400 UAE Time), India’s M3 money supply (1530 UAE Time), Brazil’s industrial production (1600 UAE Time), US MBA mortgage applications (1600 UAE Time), ADP employment change (1715 UAE Time), initial jobless claims (1730 UAE Time), continuing jobless claims (1730 UAE Time), Turkey’s treasury cash balance (1830 UAE Time), EIA crude oil stocks change (1930 UAE Time), EIA gasoline stocks change (1930 UAE Time), EIA distillate stocks change (1930 UAE Time), EIA natural gas stocks change (2100 UAE Time) and FOMC minutes (2300 UAE Time), as well as Argentina’s industrial production (2300 UAE Time).