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RSM Chief Economist Joseph Brusueras: Warsh delivered the right hawkish signals at the press conference and attempted to reinforce the Fed’s credibility in restoring price stability, while also enhancing his own credibility.U.S. stocks continued to decline after the Walsh press conference, with the S&P 500 falling 1%, its biggest drop since July 29, the Dow Jones Industrial Average down 1.65%, and the Nasdaq Composite down 0.6%.On September 17th, Federal Reserve Chairman Warsh declined to answer questions at a press conference regarding his interactions with US President Trump. Trump has been calling for lower interest rates in recent months. Warsh stated, "I have no comment on my discussions with the president." White House Council of Economic Advisers Chairman Christopher Phelan said on Tuesday that raising interest rates would be a "mistake."On September 17th, Federal Reserve Chairman Warsh stated that he would not disclose details of future interest rate decisions by the Federal Open Market Committee (FOMC). He said, "I am not responsible for providing forward guidance. Our decision today (to raise interest rates) is a carefully considered, serious, and responsible one. We have been preparing for and thinking about this decision for the past 110 or 120 days." Warsh also stated that this decision was not market-driven. He said, "Our decision today is based on our assessment of the current situation, our judgment of the employment trend, and our assessment of the strength of the economy. Sometimes, the market tries to anticipate our decisions. I watch market prices to see what information the market is sending. But todays decision is our own."On September 17th, Warsh stated that while the Federal Reserve cannot prevent price shocks in commodities such as oil on its own, the central bank can use policy tools to prevent further spread of inflationary pressures. Warsh said, "We cannot influence the price of any single commodity, such as oil or groceries." However, he pointed out, "We can and will ensure that any changes in relative prices do not spread further, and do not have second- or third-order effects on the economy. Thats our responsibility, and thats what were doing." Warsh made these remarks as U.S. diesel prices hit a record high due to the Iran war.

Following a drop in oil prices, the USD/CAD has recovered

Larissa Barlow

Apr 01, 2022 10:03

Tips 

  • The dollar soared as progress in the Russia-Ukraine peace talks stalled.

  • Yields declined as investors considered inflation and macroeconomic indicators.

  • Because of the persistent geopolitical uncertainties, gold and silver prices have risen.

  • Oil prices are falling as Vice President Biden considers unleashing strategic petroleum stockpiles.

 

The dollar rises against the Loonie as modest progress in peace talks weakens the commodity-linked Loonie. Benchmark rates have fallen as inflation and macroeconomic data hint to rate hikes of 50 basis points. Until Biden's oil announcement, gold prices were on track for their strongest quarter in a decade. The announcement decreased demand for safe-haven gold and alleviated inflation concerns. Due to minimal progress in peace talks, the dollar rose versus the Euro and other commodity-linked currencies. Oil prices have fallen as the Biden administration considers deploying vast amounts of oil reserves. The government may release 180 million barrels over a six-month period, amounting to one million barrels every day. The United States has a stockpile of 570 million barrels. The strategy may have a greater impact on energy prices.

 

The PCE Deflator, which the Fed monitors, increased by 6.4 percent in February, up from 6 percent in January. The PCE index is a measure of the prices paid for goods and services in the domestic market. The reading was the largest increase since 1982. The figures point to a more significant growth in goods prices, while services remained relatively unchanged. Concerns regarding economic development arose as a result of rising inflation caused by the Russia-Ukraine conflict. The Fed's preferred inflation index, core PCE inflation, which excludes food consumed at home and food services, climbed 5.4 percent year on year. The reading came up at 5.5 percent, which was little lower than expected.

Technical Evaluation

The USD/CAD is recovering as the Canadian dollar struggles with falling oil prices and continuing geopolitical tension. Despite today's recovery, the currency pair is under pressure and will continue to trade lower. Despite crossing above the key 1.25 barrier, the pair has since fallen below it and is now trading at 1.249. If the pair falls below 1.26, the negative trend may become less definite. Gains should be limited by resistance at the recent breakdown near 1.261. The horizontal trendline near the January lows of 1.246 provides support. Near the recent breakdown level of 1.261, resistance can be found. As a result of the fast stochastic's crossover buy signal, short-term momentum turns positive.

 

The MACD line generated a crossover sell signal, indicating a negative medium-term momentum. When the MACD line (the 12-day moving average minus the 26-day moving average) passes the MACD signal line, this occurs (the 9-day moving average of the MACD line).

 

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