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On May 4th, German Chancellor Merz stated on May 3rd that the recent US decision to reduce its troop presence in Germany was "unrelated" to his criticisms of the war with Iran. Speaking on German television channel ARD, Merz said he was not surprised by the US governments decision to reduce troop levels, adding, "What weve heard these past few days isnt all new. The situation may have indeed escalated somewhat, but this is not a new development." Merz stated that he would not abandon cooperation with US President Trump, saying, "For us, the United States remains the most important partner in NATO." He emphasized that the USs nuclear sharing arrangements have not been reduced in any way, and there are no restrictions on the US commitment to providing nuclear deterrence to the NATO region. Merz also stated that the Tomahawk cruise missiles promised by the US in 2024 will not be deployed in Germany for the time being, because "the Americans dont even have enough for themselves right now."According to the Financial Times, several banks, including JPMorgan Chase and Morgan Stanley, are looking to shift risk to avoid being “overwhelmed” by data center debt.On May 4th, an Al Jazeera reporter pointed out that regardless of what is currently being discussed at the negotiating table, Iranians and Americans are speaking two different languages. What we are seeing may simply be negotiations to maintain dialogue, but this does not guarantee that unexpected events will not occur, triggering a new round of intense conflict. He believes that the differences between the two sides are difficult to bridge. When the US sets "surrender" as its bottom line, while Iran rejects any proposals that approach this situation, he sees no substance in the negotiations. However, the current situation presents a two-way pressure scenario: the US is pressuring the Iranian economy, while Iran is pressuring the global economy. It remains to be seen who will back down first. The risk now is that this situation, perceived as pressure from both sides, could escalate into a stalemate. In this scenario, war would once again loom, especially if Israel were to intervene to break the deadlock.According to Israeli media outlet Ynet, Israel is preparing for an escalation of the situation and has expressed skepticism about the US strategy of containing Iran.On May 4th, local time, Ukrainian President Volodymyr Zelenskyy held separate meetings with the Prime Ministers of Norway, Finland, the United Kingdom, and the Czech Republic in Yerevan, the capital of Armenia, on May 3rd. During his meeting with British Prime Minister Keir Starmer, Zelenskyy stated that Ukraine is willing to launch the next round of trilateral negotiations, with achieving a just and dignified peace being its core demand. Zelenskyy and Starmer also discussed support for Ukraines energy sector. Zelenskyy briefed Starmer on the situation on the front lines and the Russian attacks on Ukraine, emphasizing the need for a unified European air defense system.

USD/CAD encounters resistance near 1.3580 as focus shifts to FOMC minutes

Daniel Rogers

Jan 03, 2023 15:20

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After failing to surpass the immediate resistance level of 1.3580, the USD/CAD pair is exhibiting some volatility in the Tokyo morning session. The Canadian dollar is attracting bids due to a boost in investor risk appetite and a rise in oil prices.

 

As investors believe that the US Dollar Index will continue to underperform, risk-sensitive currencies are gaining traction. After giving up the crucial support level of 103.50, the USD Index saw a significant fall on Friday. In the interim, S&P500 futures have began trading on a positive note, signaling a reduction in risk.

 

This week, the Federal Open Market Committee (FOMC) report will be the focal point of attention. The minutes of the Federal Open Market Committee will explain why the Federal Reserve raised interest rates by 50 basis points (bps) in December's monetary policy meeting (Fed).

 

As they preview this week's US events, TD Securities analysts believe that the FOMC's December policy meeting minutes will shed fresh light on the Fed's policy outlook for 2023. According to analysts at TD Securities, by the time of the FOMC meeting in May, the terminal rate will be between 5.25 and 5.50 percent.

 

Investors will eagerly scrutinize the Canadian employment data that will be released on Friday. Analysts at TD Securities expect an 8,000 gain in employment in December as the labor market begins to deteriorate. The unemployment rate may decline to 5.2%, and the annual wage range may rise to 5.5%. A rise in pay growth may keep inflation at elevated levels.

 

In the interim, the price of oil has risen to over $80.50 per barrel as investors anticipate a drop in Covid-19 cases in China, which will restore economic development. Notably, Canada is the United States' leading oil exporter, and higher oil prices strengthen the Canadian Dollar.