The governor of the Bank of Canada, Tiff Macklem, said that the status of the US dollar as a “global safe asset” could be undermined by President Donald Trump’s trade policies.
In his speech on Tuesday, McLeum said that global investors are considering whether the United States’ dominance in global financial flows will weaken as the world’s largest economy withdraws from global trade and runs huge fiscal deficits.
“Providing safe assets to the world has its benefits. The United States can borrow at lower interest rates than it otherwise would to finance its growing fiscal deficits,” McLeum said in a speech in Saskatoon, Saskatchewan.
But “President Trump’s ‘liberation day’ has shaken global confidence,” said McLeum, referring to the president’s announcement on April 2 that the United States would impose new tariffs on dozens of trading partners.
McLemore said that investors had expected tariffs to support the dollar, but the dollar has depreciated instead and the gold price has risen. He said that since the beginning of this year, the dollar has depreciated by about 10% against other major currencies, and its “safe-haven role has been questioned”.
“It is too early to say whether this marks the beginning of a new era,” the governor said. Although the US dollar is likely to remain the world’s reserve currency for the foreseeable future, “for many, its value as a hedge in times of stress has been undermined.”
McLemore said that Trump’s attempts to influence the Fed’s behavior have also “raised questions about whether the US monetary policy can remain independent.”
The bank’s chief warned that trade changes affecting international capital flows, the “unsustainable” US fiscal deficit and persistent trade imbalances could increase risks to financial stability.
He said, “The United States has sharply turned to protectionism. The significant increase in tariffs by the United States is weakening global demand, disrupting supply chains, pushing up prices, and dragging the Canadian and global economies into a permanent slump.”
“Escalating trade frictions with the United States means our economic efficiency will decline, costs will rise and income will fall,” said McLeum. “Now is the best time to deepen investment, enhance productivity and expand markets.”
His suggestions include boosting inter-provincial trade, seeking new overseas markets, attracting investors by shortening the project approval process (which the Mark Carney government has promised to do), and reducing regulatory uncertainty. McLeum said that Canada needs to take advantage of the existing trade agreements it has signed with 50 countries other than the United States.
Technical analysis:
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Gold: After breaking above 3790 overnight, it is currently consolidating in a channel within the short-term cycle. The upward trend of gold remains unchanged, and there are no bearish fundamental factors. In terms of operation, a bullish mindset should be maintained. For today, it is recommended to focus on buying on pullbacks after breaks and low-probability liquidity buying. For detailed positions, please consult the plugin.
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The Nasdaq: The rate cut has provided relatively effective support for prices, but the behavior of sweeping liquidity occurs every day. Currently, after the overnight decline, the price has not seen an effective rebound, but it shows signs of convergence. For today, it is suggested to participate in a long signal if there is a convergent upward breakthrough; if it breaks down, it is recommended to wait for the sweeping in the 24300/24400 area and then catch the rebound. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: After the price momentum broke through the blue zone yesterday, it performed very strongly without any effective pullback, rising all the way above 64. Currently, the price is in a converging triangle pattern. If it breaks out upward, the operation of momentum breakthrough buying should be maintained. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key financial data and events to focus on:
16:00 Germany’s IFO Business Climate Index for September
22:00 US New Home Sales for August
