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Japanese Prime Minister Sanae Takaichi: I will not comment on interest rates, as they are determined by a variety of factors.Japanese Prime Minister Sanae Takaichi stated that she hopes the Bank of Japan will work closely with the government to implement appropriate policies to stabilize and achieve the 2% inflation target. Specific monetary policy measures will be determined by the Bank of Japan.On September 17th, analysts pointed out that under ideal circumstances, the Bank of Englands Monetary Policy Committee is expected to maintain the interest rate at 3.75%, continuing the 6-3 split vote from July (Pierre, Mann, and Green would vote for a rate hike). Recent comments from the Bank of England have not shown any clear signs of a shift to a more hawkish stance, and inflation is still considered manageable. The energy situation is a major risk – natural gas prices have exceeded the peak of the central banks adverse fourth-quarter forecast. This increases the risk that the central bank may be more vigilant about rising inflation. A hawkish shift would result in a 5-4 vote. Another 6-3 split vote, coupled with cautious guidance, would put downward pressure on the pound. Overall, the market will focus on the voting results and inflation rhetoric to see if energy factors are pushing the central bank towards a tightening policy.Japanese Prime Minister Sanae Takaichi: No decision has been made yet regarding the summit with the United States.Canadian Prime Minister Carney: Canada and the EU cooperate on the basis of shared values.

USD/CAD declines to 1.3500 on firmer Oil prices, BoC concerns over US inflation, and Fed Minutes

Daniel Rogers

Apr 10, 2023 14:35

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The USD/CAD maintains losses close to 1.3500, shattering a four-day winning trend, as traders brace for key Easter Monday data/events on major bourses. However, the recent decline in the Loonie-U.S. dollar exchange rate may be due to the increase in the price of WTI petroleum oil, Canada's primary export. In contrast to the recent increase in ardent Fed forecasts, the Bank of Canada's (BoC) dovish bias poses a challenge to pair sellers.

 

After increasing for three consecutive weeks, WTI crude oil prices gain 0.61 percent intraday near $80.00. Recent increases in the price of black gold may be due to geopolitical concerns surrounding China and Taiwan. In addition to the supply cut by OPEC+ and the faltering US dollar, the energy benchmark is sustained by the supply cut by OPEC+ and the weakening US dollar.

 

However, the US Dollar Index (DXY) has fallen for three consecutive weeks and is under pressure near 102,000.

 

Fears of higher Fed rates versus inaction from the Bank of Canada (BoC) grew after the upbeat US Jobs report versus the lack of significant positives in the March Canadian jobs report.

 

As a result, the CME's FedWatch Tool indicates a 69% chance of a 0.25 basis point rate hike in May, up from 55% prior to the US employment report.

 

Canada's headline Net Change in Employment increased to 34.7K in March from 21.8K in February, compared to the market consensus of 12K, while the Unemployment Rate came in at 5% versus the analysts' estimate of 5.0%. During the specified month, the Participation Rate decreased to 65.6% from the expected and previous rate of 65.7%. In addition, the average hourly wage fell 5.2% year-over-year in March, down from 5.5% in February.

 

In contrast, the US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) increased by 236K in March, the lowest increase since January 2021 (considering revisions), compared to the expected 240K and the previous 330,000. Additionally, the unemployment rate fell from 3.6% to 3.5%, while the labor force participation rate rose from 62.6% to 62.6%. The annual wage inflation rate decreased from 4.6% to 4.2%, below market expectations of 4.3%.

 

Futures on US equities ended higher, but yields remain under pressure ahead of the crucial BoC monetary policy meeting, US inflation, and Fed Minutes. Given the dovish concerns from the Bank of Canada (BoC) and the likely hawkish comments in the FOMC Minutes, the USD/CAD may see additional gains, barring any unexpected developments.


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