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A survey by the Central Bank of Russia predicts that the average benchmark interest rate will be 14.5% in 2026 (unchanged from previous forecasts).On September 2nd, Federal Reserve Chairman Williams stated that bond yields are an important indicator for the Feds assessment of the economic situation. The recent rise in yields was primarily driven by strong economic performance, an optimistic economic outlook, and robust investment demand, with some correlation to the Middle East conflict. However, yields currently do not appear to be significantly affected by the inflation outlook. Williams emphasized that the Fed will consider all economic data comprehensively, and its ultimate responsibility remains price stability, with reducing the inflation rate to 2% being the top priority. Tariffs and the Middle East war are the main factors contributing to current inflation exceeding the target, but a second-degree inflation effect from tariffs has not yet been observed. Inflation expectations remain under control, and recent inflation data is encouraging, showing an overall downward trend, although inflation in the services sector remains significantly high. He stated that the labor market is stable and remains robust, and it is necessary to push inflation back to 2% in the foreseeable future. He hopes to further observe and analyze economic data before making the next policy decision and will continue to gather information for the next FOMC meeting. Williams expressed support for the decisions of the July FOMC meeting, believing that the current interest rate level is appropriate and monetary policy is progressing smoothly.Tensions in the Middle East remain high, with Brent crude oil prices nearing the $96 mark during trading. A chart provides a quick overview of the pre-market conversion prices of crude oil between domestic and international markets.The US August ADP employment figures were released, showing the smallest increase since January and falling short of market expectations. A quick chart provides a view of the converted prices of gold and silver in the pre-market session.Syria has confirmed to the International Atomic Energy Agency that it will participate in a briefing on nuclear issues from September 7 to 11.

With eyes on Fed's Powell and BoC's Mackem, USD/CAD falls toward 1.3400 as oil prices rise

Alina Haynes

Feb 07, 2023 15:56

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Tuesday morning's trading near 1.3430 represents the first negative daily performance in four days for the USD/CAD pair, extending losses near the intraday low. Despite this, the Loonie pair remains close to 12-day highs as traders await comments from Governor Tiff Macklem of the Bank of Canada (BoC) and Chairman Jerome Powell of the Federal Reserve (Fed).

 

The recent decline of the quote may be related to the market's cautious optimism in light of receding economic fears. The strengthening of WTI crude oil prices, Canada's principal export commodity, might exacerbate the downturn.

 

WTI crude oil rises 0.40 percent to $75.00, extending yesterday's rebound from a two-month low. The recovery of the price of black gold may be related to diminishing fears of an economic slowdown in the United States as well as recent positive news reports regarding Sino-American ties.

 

Even though the US economic calendar was fairly silent, Treasury Secretary Janet Yellen and President Joe Biden's growth optimism appeared to weigh on US Dollar bulls. Despite this, it appears that hawkish Fed deliberations strengthen US Treasury bond yields and the US Dollar. In an interview with Bloomberg, Federal Reserve Bank of Atlanta President Raphael Bostic noted, "The robust job market likely indicates 'we have a little bit more work to do.'"

 

A dash on the US diplomatic visit to Beijing and China's angry response to the US shooting down its balloon by labeling it as a spying attempt triggered the market's risk-off mentality and lifted the USD/CAD pair the day before. Recent comments by US Vice President Joe Biden appear reassuring, as he noted, "The balloon incident does not impair US-China relations."

 

After a two-day rebound from the monthly low, the 10-year US Treasury bond struggled for direction at 3.63%, while S&P 500 Futures saw minor gains reflecting the prevalent sentiment.

 

Moreover, bullish readings of the Canada Ivey Purchasing Managers Index for January, 60.1, compared to 55.2 expected and 49.9 prior, appear to exert downward pressure on the USD/CAD exchange rate.

 

Future USD/CAD traders may react swiftly to the December Canadian trade statistics. However, the words of Bank of Canada Governor Macklem, Federal Reserve Chairman Jerome Powell, and US Vice President Joe Biden's State of the Union (SOTU) address will be crucial for providing clear directives.


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