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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

USD/CAD Remains in Resistance Territory in the Absence of a Catalyst

Daniel Rogers

Apr 29, 2022 09:49

At the time of writing, the USD/CAD currency pair was trading at 1.2805 and consolidating in resistance territory. The US dollar strengthened against the majority of the G10 currencies before easing somewhat near the close of the day, providing some comfort to the commodity complex. Nonetheless, DXY, a measure of the dollar's value relative to a basket of currencies, hit a two-decade high as investors priced in a succession of relatively low interest rates from the Federal Reserve.

 

A rebound in risk appetite occurred throughout the Wall Street session, as investors noticed evidence of robust consumer demand hidden by the unexpected decline in Gross Domestic Product growth for the last quarter, the first decline in GDP growth since 2020. Nonetheless, the risk-off tone is firmly established, as evidenced by the S&P 500's more than 5% decline in April, which is on track to be the worst month since 1987's bear market.

 

Concerns over China's war against COVID, combined with the Ukraine crisis and hawkish central banks intent on tightening monetary policy, are fueling recession fears. Treasury Secretary Janet Yellen came out overnight, stating that the global pandemic and Russia's invasion of Ukraine demonstrate the possibility of future large economic shocks, adding that downturns are "expected to continue to stress the economy."

 

Meanwhile, the price of crude oil has increased to USD107/bbl, bolstering the CAD, despite the growing likelihood of a European ban on Russian oil. "Germany is considering a gradual suspension of Russian oil imports, which would result in a broader sanction by the area. Germany's minister has already stated that the country can survive without Russian oil," according to analysts at ANZ Bank.

 

"Investors are anxious about compensating for the barrels lost as a result of the impending European sanctions. Oil product prices are also increasing, which helps refiners' profitability. However, demand for oil products remains sluggish in China as the number of COVID cases continues to rise."

All Eyes on the Federal Reserve

All eyes will now be on the Federal Reserve meeting next week. Expectations of the Fed tightening are high. Markets anticipate at least a 50 basis point increase at the May 3-4 meeting and another at the June 14-15 meeting. This is fully priced in, with over 25% odds of a June 75 basis point shift. The shock will come if anything falls short of or exceeds this consensus at next week's summit.

 

"Looking ahead, the swaps market is pricing in 275 basis points of tightening over the next 12 months, implying a policy rate at 3.25 percent. While this comes close to meeting our own target of a 3.5 percent terminal rate, we continue to see risks that the predicted terminal rate will move even higher if inflation proves to be even more resistant than expected," Brown Brothers Harriman analysts wrote.

USD/CAD Technical Evaluation

According to the following analysis, USD/CAD is consolidating in resistance zone and may be on the verge of a big correction towards 1.2720/50:

 

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