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1. The three major U.S. stock indices closed slightly lower, with the Dow Jones Industrial Average down 0.27%, the S&P 500 down 0.13%, and the Nasdaq down 0.07%. UnitedHealth Group fell over 2%, and Nvidia fell over 1%, leading the Dow lower. The Wind US Tech 7 Index rose 0.01%, with Tesla up nearly 3% and Facebook up nearly 2%. Most Chinese concept stocks rose, with NIO up over 8% and Baidu up nearly 8%. 2. U.S. Treasury yields fell across the board, with the 2-year Treasury yield down 3.15 basis points to 3.495%, the 3-year Treasury yield down 2.49 basis points to 3.469%, the 5-year Treasury yield down 1.56 basis points to 3.585%, the 10-year Treasury yield down 0.58 basis points to 4.028%, and the 30-year Treasury yield down 0.19 basis points to 4.652%. 3. International precious metals futures closed mixed, with COMEX gold futures up 0.23% at $3,727.50/oz and COMEX silver futures down 0.19% at $42.88/oz. Analysts indicate that a weakening US dollar, rising expectations of a Federal Reserve rate cut, geopolitical risks, and industrial demand are supporting precious metals prices, though some contracts have fallen due to policy uncertainty. 4. International oil prices rose strongly, with the main US crude oil contract closing up 1.97% at $64.55/barrel, and the main Brent crude oil contract up 1.59% at $68.51/barrel. Ukraines intensified attacks on Russian oil infrastructure have raised supply concerns. Meanwhile, a 3.42 million barrel drop in US API crude oil inventories, far exceeding expectations of a 1.565 million barrel drop, further supported oil prices. 5. Most base metals closed higher in London. LME nickel futures rose 0.06% to $15,445/ton, LME aluminum futures rose 0.43% to $2,712/ton, and LME tin futures rose 0.32% to $34,750/ton. LME copper futures fell 0.68% to $10,117/ton. Data released by the London Metal Exchange (LME) showed that nickel inventories have accelerated in the past two weeks. On September 16, LME nickel stocks increased by 1,950 tons to 226,400 tons, a four-year high.On September 17, the U.S. government officially launched the process of reviewing and possibly renewing the 2020 North American Free Trade Agreement on Tuesday, soliciting opinions from the public, businesses, and unions on the agreement. The request from the Office of the United States Trade Representative solicits opinions on a wide range of issues related to the USMCA, including compliance, issues affecting the investment environment, and strategies to "enhance North Americas economic security and competitiveness." Comments must be submitted within 45 days of the notice being published in the Federal Register, and the Office of the United States Trade Representative will hold a public hearing on the agreement on November 17. According to the law, public comment and hearings are required before the formal joint review of the USMCA begins. The joint review is scheduled to start on July 1, 2026.The United States has launched a review of the USMCA and is soliciting opinions.According to Japans Asahi Shimbun: Japan will not recognize the State of Palestine at the United Nations General Assembly.On September 17, Chery Automobile announced on the Hong Kong Stock Exchange that it plans to issue 297,397,000 H shares (subject to the exercise of the over-allotment option) for its Hong Kong listing, with a price range of HK$27.75 to HK$30.75. The price is expected to be completed on September 23. The shares are expected to begin trading on the Hong Kong Stock Exchange on September 25.

Bank of Canada, Canadian Dollar, USDCAD, Inflation

Larissa Barlow

Apr 14, 2022 10:26

The Bank of Canada (BoC) chose to increase its benchmark policy rate by 50 basis points (bps), the highest increase in more than two decades. Additionally, the BoC announced that quantitative tightening (QT) would begin on April 25th, as the central bank seeks to combat three-decade high inflation. According to the policy statement, "interest rates will need to rise further" because inflation has exceeded previous predictions for 2022. Notably, inflation predictions were revised significantly upward, with the Bank of Canada now expecting inflation to hover around 6% for the most of the first half of 2022.

 

Canada, like other central banks, has struggled to curb price pressures. In January, the Bank of Canada forecasted first-quarter inflation of 5.1 percent. However, it is on track to exceed 6%, much beyond the BoC's aim of 2%. Due to Russia's invasion of Ukraine, economists worldwide have been obliged to revise their inflation and growth forecasts.

 

The BoC also confirmed its balance sheet reduction plans, with the central bank opting not to replace maturing bonds. QT is scheduled to begin on April 25, with around a quarter of the government debt acquired during the pandemic (approximately C$350 billion) maturing during the next 12 months. 

USD/CAD 1 Hour Chart

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Despite the Bank of Canada's rise, the USDCAD continues to trend higher. The cross briefly declined in nine consecutive sessions, with the Canadian Dollar's rise supported by increasing oil prices. This decrease peaked on April 5th near 1.2402, and has since recovered significantly. A fall in risk appetite has resulted in a significant bid for the USD in recent days, with the US Dollar Index gaining for the last ten days. With the USDCAD firmly on the rise, any dips may be bought as we approach the May FOMC meeting, at which the Fed is likely to hike rates by 50 basis points and announce plans for balance sheet reduction.