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On August 30th, Finnish President Alexander Stubb stated on Saturday that he does not believe Russia will attack NATO, "the worlds most powerful military alliance." However, in an interview with the German newspaper Bild, he said NATO should "prepare for the worst to prevent it from happening." Stubb pointed out that Russia has lost more soldiers than it recruited and judged that Russia may mobilize more troops in the fall, although this move would have "domestic political implications." He said Moscow is in an "increasingly complex situation," but emphasized that Russia will not end the conflict due to an economic downturn. He stated, "Never underestimate how much economic hardship the Russians can withstand."On August 30th, Yonhap News Agency reported that US President Trumps financial disclosures revealed he traded shares of e-commerce giant Coupang Inc. twice in June through a fund manager. Meanwhile, tensions between the US and South Korea continue to escalate over South Koreas regulatory handling of the massive data breach at the US-listed e-commerce giant. In July, the US House Judiciary Committee released a temporary staff report accusing the South Korean government of carrying out a "discriminatory attack" against Coupang and all other US companies, stating that Coupang has been a "consistently targeted entity."On August 30, Iraqi Prime Ministers Security Advisor Qassem Araji stated in a recent interview with Al Jazeera that Iraq maintains "good relations" with both Iran and the United States and seeks to act as a "bridge" for communication among all parties to reach an agreement that safeguards the interests of the entire region. He added that Iran has emphasized the necessity of eliminating extremist groups within Iraq.On August 30th, SK Hynix CEO Guo Luzheng stated that the company remains open to further investment in the US semiconductor industry, while predicting that the global memory chip shortage will continue until the end of 2030. "We are always open to more investment, but no decisions have been made yet," Guo Luzheng said. He stated that SK Hynix is searching globally for potential sites that can meet its R&D and testing needs, noting that electricity, water resources, and government incentives are key considerations. Guo Luzheng said, "We are open to any location that can provide sufficient infrastructure and resources." He also expressed hope that the company will bring "more good news" to the US artificial intelligence industry in the future.Iraqi Prime Ministers Security Advisor Qassem Araj: Iraq seeks to become a "bridge" between Iran and the United States.

As Oil Bears Take a Break and Focus on the Federal Reserve and Geopolitics, USD / CAD Reverses from a Multi-Day High

Alina Haynes

Feb 23, 2023 14:57

USD:CAD.png 

 

As it reverses from a seven-week high marked the day before on Thursday morning, USD/CAD accepts offers to reestablish the intraday low near 1.3540. Consequently, the Loonie pair suffers its first daily loss in three days, amidst market consolidation and cautious optimism.

 

Nevertheless, the absence of Japanese traders due to the Tokyo holiday has joined the previous decline in US Treasury bond yields and a decline in US inflation expectations to influence the most recent USD/CAD exchange rate. The 10-year and 5-year breakeven inflation rates from the Federal Reserve Bank of St. Louis (FRED) indicate a decline in US inflation expectations by falling from the multi-day high.

 

On a similar trajectory, Canada's primary export commodity, WTI petroleum oil, may experience a reversal. The black gold fell to a 13-day low after losing nearly 3.0% the previous day due to lackluster US inventories and a strong US Dollar. However, as of press time, the energy benchmark has posted modest gains and is trading near $74,00.

 

Despite recent market consolidation, USD / CAD buyers remain optimistic due to hawkish Federal Reserve (Fed) and geopolitical concerns.

 

In terms of geopolitics, US President Joe Biden believes that his Russian counterpart is incapable of using nuclear weapons by renouncing an international treaty. The most recent round of negotiations between the West and China has exacerbated the Ukraine-Russia conflict, which has yet to dispel the concerns surrounding it. The Wall Street Journal (WSJ) reported recently that the United States is considering releasing intelligence on China's prospective arms transfer to Russia. Previously, China-Russia relations appeared to have exacerbated geopolitical tensions, as the United States strongly condemned such actions and favored a surge towards risk aversion, which favored the US Dollar.

 

In a separate section of the most recent Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes, all participants agreed that additional rate increases are necessary to achieve the inflation target, while also favoring further Fed balance sheet reductions. James Bullard, president of the Federal Reserve Bank of St. Louis, told Reuters that the Fed will need to raise interest rates above 5% to combat inflation. The policymaker also stated that he believes there is a good possibility they will be able to beat inflation this year without causing a recession. In addition, according to Reuters, John Williams, president of the Federal Reserve Bank of New York, emphasized the concerns supporting the Fed's higher interest rates by stating, "Fed is utterly committed to getting inflation back to 2%."

 

US Treasury bond yields are inactive after retreating from a multi-day high, while Wall Street closed neutral and the S&P 500 Futures are modestly bid as of late.

 

The second estimates of the US Personal Consumption Expenditures (PCE) data for the fourth quarter (Q4) and the preliminary readings of the US Q4 Gross Domestic Product (GDP) will be crucial for providing USD / CAD traders with new information in the near future.


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