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Federal Reserve Statement: The Federal Open Market Committee (FOMC) unanimously elected Kevin Warsh as Chairman of the FOMC.On May 23, U.S. Director of National Intelligence Tulcie Gabbard announced on social media on May 22 that she had submitted her resignation to President Trump that day to care for her husband, who is battling cancer. U.S. media reports indicate that Gabbard was effectively "forced out" by the White House. In her resignation letter, Gabbard stated that her husband had recently been diagnosed with "an extremely rare form of bone cancer," and her resignation would take effect on June 30. Trump announced on social media that day that Deputy Director of National Intelligence Aaron Lucas would serve as acting Director of National Intelligence. According to multiple U.S. media reports, Gabbard had been marginalized within the White Houses national security decision-making system, and in recent months, Trump had expressed considerable dissatisfaction with her and considered replacements. Gabbard has long opposed U.S. government military intervention abroad and disagreed with Trump on the Iranian nuclear issue. After the U.S. and Israel launched a large-scale military operation against Iran in late February, she testified before Congress that Iran had not attempted to rebuild its nuclear program and refused to confirm that Iran posed an imminent threat as the U.S. claimed.According to the Wall Street Journal, sources say the United States has suspended visa issuance to people who have visited Ebola-affected areas. This policy applies to individuals planning to travel to the United States within 21 days in South Sudan, the Democratic Republic of Congo, or Uganda.According to the U.S. Commodity Futures Trading Commission (CFTC), in the week ending May 19, speculators reduced their net short positions in CBOT U.S. 2-year Treasury futures by 41,775 contracts to 1,560,837 contracts; increased their net short positions in CBOT U.S. 10-year Treasury futures by 66,885 contracts to 848,052 contracts; increased their net short positions in CBOT U.S. ultra-long-term Treasury futures by 15,470 contracts to 254,464 contracts; and reduced their net short positions in CBOT U.S. 5-year Treasury futures by 11,629 contracts to 1,350,516 contracts.According to the U.S. Commodity Futures Trading Commission (CFTC), in the week ending May 19, crude oil speculators increased their net long positions in WTI crude oil by 15,017 contracts, reaching 110,348 contracts.

As oil prices fall and investors become risk-averse before the BOC meeting, USD/CAD rises to 1.3200

Daniel Rogers

Sep 07, 2022 16:50

截屏2022-09-07 上午11.31.45.png 

 

The USD/CAD has risen for three consecutive trading days, and it is currently trading near 1.3190, which is the weekly high. To appease buyers near the highest levels in two months prior to the Bank of Canada (BOC) Monetary Policy Meeting, the Loonie pair has recently been applauding rising rates and a risk-aversion wave.

 

Declining prices of WTI crude oil, Canada's principal export, further strengthen the USD/CAD exchange rate as speculators anticipate the fifth BOC rate hike in 2022.

 

WTI crude oil prices have dropped to their lowest level since late January, down 1.70 percent to $85.40 as of press time on the back of recession worries and a stronger US dollar. Market perceptions of the latest production cut by OPEC and its partners, including Russia, known collectively as OPEC+, could add to the downward pressure on commodity prices.

 

In addition to the covid-related pessimism in China and the European energy crisis, improved US data strengthened the hawkish Fedbets and boosted the US dollar.

 

In the United States, the ISM Services PMI rose to 56.7 from 55.1 and above market expectations. In contrast to initial expectations of 45.0 and 44.1, the S&P Global Composite PMI and Services PMI both fell to 44.6 and 43.7, respectively. Still, following the news, the US Dollar Index (DXY) rose to a new 20-year high. There is now a 72.0% possibility of a 50 bps rate hike by the Fed in September, according to the CME's FedWatch Tool, up from 57.0% the day before.

 

The three-day surge in rates for 10-year US Treasuries to 3.25 percent is the highest it has been since June 15. The S&P 500 futures have also dropped to a new seven-week low, falling 0.55 percent intraday to 3,890.

 

The stronger U.S. dollar, declining oil prices, and reduced risk appetite should keep USD/CAD bulls optimistic despite the BOC's expected base rate increase of 75 basis points to 3.25 percent. Consolidating recent gains may be possible for the Canadian currency, however, thanks to hawkish comments from the BOC Rate Statement and softer Fedspeak.


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