The AUD is ending the day as the strongest of the major currencies, and the USD is the weakest in trading today.
The USD was the weakest of the major currencies.
The USD’s weakness was influenced by somewhat weaker US data, lower rates and comments from Fed Chair Powell who kept easing a bit later in the year in play. With regard to economic data, the ADP employment report came in touch weaker at 140K versus 150K. The US JOLTs job openings was also weaker, as was wholesale inventories and sales .
In his testimony to the House of Representatives, Federal Reserve Chair Powell outlined the central bank’s cautious stance on economic outlook and policy rate adjustments amid ongoing concerns about inflation and economic growth. Powell emphasized that the Fed is unlikely to reduce the policy rate until there is greater confidence that inflation will sustainably move toward the 2% target. Nevertheless, he indicated a potential easing of policy restraint later in the year, with the policy rate expected to have reached its peak for this cycle. The Fed’s approach will be guided by careful assessment of incoming data, with awareness of the risks of adjusting rates too prematurely or too hesitantly.
He added that there is an expectation for housing services inflation to decrease. On economic growth, Powell reported continued solid performance with no significant near-term risks of recession, highlighting a strong and tight labor market conducive to achieving a soft landing. This optimistic view extends to managing risks in the commercial real estate sector, with the Fed ensuring banks can cope with potential losses, which may remain a challenge for years.
Looking ahead, Powell suggested that if the economy evolves as anticipated, significant rate reductions could occur in the coming years, dependent on improved inflation readings. He acknowledged the potential for surprises in the economy’s next chapter, underscoring the Fed’s readiness to adapt its policy in response to unforeseen developments.
In Canada today, the Bank of Canada announced their rate decision and chose to keep rates unchanged as expected but was less dovish in their official statement and those of Governor Macklem.
Macklem’s comments highlighted several key considerations influencing the central bank’s policy decisions. He noted the significant impact of shelter price inflation on the Bank of Canada’s decision-making process and tempered expectations regarding the timeline for achieving the 2% inflation target, suggesting it is unlikely to be met this year. Despite the challenges posed by inflation, Macklem observed that the labor market has adjusted relatively smoothly to higher interest rates. A notable point of interest for Macklem has been the unexpected strength of the US economy over the last few quarters, which has contributed to the Bank of Canada’s comfort with current measures of core inflation.
Macklem emphasized a cautious approach to future rate decisions, stating that each decision will be taken one at a time, with the benefit of the most current data available, particularly by the time of their April decision. He also warned that if core inflation measures do not decrease, the forecast for total inflation reduction might not materialize. Nonetheless, there is optimism within the Bank of Canada, as progress in the fight against inflation has been observed, with further progress expected. The bank continues to view the risks to the inflation outlook as reasonably balanced, and inflation expectations remain well-anchored, aiding in the effort to bring inflation back to target levels in Canada.
The USDCAD did move sharply lower in days of closing the day between its 100 bar moving average on the 4-hour chart at 1.3528, and it’s 200 bar moving area on the same chart at 1.34921. The 200-day moving average comes in at 1.34793, and it will be a downside target to get to and through if the sellers want to continue their push to the downside.
USDCAD trades between its 100 and 200 bar MAs
US yields move lower today and help to keep a downward bias in the US dollar:
- two year yield 4.559%, +0.5 basis points
- 5-year yield 4.118%, -2.0 basis points
- 10 year yield 4.107%, -3.0 basis points
- 30-year yield 4.242%, -3.2 basis points
US stocks closed higher on the day but well off intraday high levels:
- Dow Industrial Average rose 75.86 points or 0.20% to 38661.06. At session highs, the index was up 272.93 points.
- S&P index rose 26.13 points or 0.54% at 5104.77. At session highs, the index is up 49.33 points
- NASDAQ index rose 91.94 points or 0.58% at 16031.53. At session highs the index was up 188.97 points.
The Fed chair will speak in front of the Senate tomorrow, before the TU jobs report on Friday. The expectations are for the employment rate to remain steady at 3.7%. The non-farm payroll is expected around 190,000 jobs.
Crude oil prices could not sustain momentum about the $80 level. The high price reached $80.67 for rotating lower. The price currently trades at $79.12
Gold prices continue its surge to the upside with a gain of $18.72 or 0.88% to $2146.70.
The price of Bitcoin is trading at $66,500 after training is high $67,645 and as low six $2843