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US non-farm payrolls data for May exceeded expectations, causing spot gold and silver prices to fall. A chart provides a quick overview of the pre-market conversion prices of gold and silver between domestic and international markets.June 5th - According to US media reports, US job growth in May exceeded all economists expectations, while the unemployment rate remained stable, further indicating that the labor market may be emerging from a prolonged period of weak hiring. Data released by the US Bureau of Labor Statistics on Friday showed that non-farm payrolls increased by 172,000 in May, with the figures for the previous two months revised upwards. This brings the job growth over the past three months to its strongest level in more than two years. The report indicates that despite recent energy price increases causing consumer confidence to plummet to historic lows, the US labor market is strengthening again after job growth nearly stalled last year. This data may further increase pressure on the Federal Reserve to consider raising interest rates to curb inflation. Following the data release, US Treasury bonds experienced a sell-off, with the two-year Treasury yield rising more than 7 basis points to 4.1%. The interest rate swap market shows that the market has increased its expectations for a Fed rate hike, and the market is now almost fully pricing in the possibility of a 25 basis point rate hike before the end of the year.The market is now fully pricing in a 25-basis-point rate hike by the Federal Reserve before the end of the year.June 5th - The U.S. economy achieved strong job growth again in May, confirming that the labor market is regaining momentum after a slump last year and potentially giving the Federal Reserve more room to keep interest rates unchanged amid rising inflation triggered by the war with Iran. Data released by the U.S. Bureau of Labor Statistics on Friday showed that nonfarm payrolls increased by 172,000 in May; the April increase was revised sharply upward to 179,000 from the previously reported 115,000. The May job growth continued the strong momentum of the previous two months. The unemployment rate remained at 4.3% for the third consecutive month. The improved job growth mainly reflects the still low level of layoffs. There are currently no signs that the Middle East conflict, leading to soaring oil prices and the prices of goods transported through the Strait of Hormuz, has had a substantial impact on the U.S. job market. Despite the strong job growth, the labor market remains in what economists call a "low hiring, low layoffs" equilibrium.June 5th - Analyst Anstey commented on the US non-farm payrolls: "We stated before the data release that recent data indicated a shift in the job market, and now thats undeniable. 2025 was a very poor year—averaging only 26,000 new jobs per month, compared to 117,000 in 2024—but the recovery in employment is evident. So far this year, the average monthly job gain has reached 79,000, with nearly 188,000 in the past three months alone, which is truly encouraging!"

As Oil Bears Take a Break and Focus on the Federal Reserve and Geopolitics, USD / CAD Reverses from a Multi-Day High

Alina Haynes

Feb 23, 2023 14:57

USD:CAD.png 

 

As it reverses from a seven-week high marked the day before on Thursday morning, USD/CAD accepts offers to reestablish the intraday low near 1.3540. Consequently, the Loonie pair suffers its first daily loss in three days, amidst market consolidation and cautious optimism.

 

Nevertheless, the absence of Japanese traders due to the Tokyo holiday has joined the previous decline in US Treasury bond yields and a decline in US inflation expectations to influence the most recent USD/CAD exchange rate. The 10-year and 5-year breakeven inflation rates from the Federal Reserve Bank of St. Louis (FRED) indicate a decline in US inflation expectations by falling from the multi-day high.

 

On a similar trajectory, Canada's primary export commodity, WTI petroleum oil, may experience a reversal. The black gold fell to a 13-day low after losing nearly 3.0% the previous day due to lackluster US inventories and a strong US Dollar. However, as of press time, the energy benchmark has posted modest gains and is trading near $74,00.

 

Despite recent market consolidation, USD / CAD buyers remain optimistic due to hawkish Federal Reserve (Fed) and geopolitical concerns.

 

In terms of geopolitics, US President Joe Biden believes that his Russian counterpart is incapable of using nuclear weapons by renouncing an international treaty. The most recent round of negotiations between the West and China has exacerbated the Ukraine-Russia conflict, which has yet to dispel the concerns surrounding it. The Wall Street Journal (WSJ) reported recently that the United States is considering releasing intelligence on China's prospective arms transfer to Russia. Previously, China-Russia relations appeared to have exacerbated geopolitical tensions, as the United States strongly condemned such actions and favored a surge towards risk aversion, which favored the US Dollar.

 

In a separate section of the most recent Federal Open Market Committee (FOMC) Monetary Policy Meeting Minutes, all participants agreed that additional rate increases are necessary to achieve the inflation target, while also favoring further Fed balance sheet reductions. James Bullard, president of the Federal Reserve Bank of St. Louis, told Reuters that the Fed will need to raise interest rates above 5% to combat inflation. The policymaker also stated that he believes there is a good possibility they will be able to beat inflation this year without causing a recession. In addition, according to Reuters, John Williams, president of the Federal Reserve Bank of New York, emphasized the concerns supporting the Fed's higher interest rates by stating, "Fed is utterly committed to getting inflation back to 2%."

 

US Treasury bond yields are inactive after retreating from a multi-day high, while Wall Street closed neutral and the S&P 500 Futures are modestly bid as of late.

 

The second estimates of the US Personal Consumption Expenditures (PCE) data for the fourth quarter (Q4) and the preliminary readings of the US Q4 Gross Domestic Product (GDP) will be crucial for providing USD / CAD traders with new information in the near future.


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