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July 1st - The World Gold Council released its "2026 Global Gold Market Mid-Year Outlook" today. Looking ahead to the second half of the year, the gold valuation framework indicates that gold will continue to serve as a barometer of the global macroeconomy, with three main possible scenarios. At current price levels, gold prices are largely in line with market consensus: the market expects the Federal Reserve to raise interest rates at least once in 2026, most likely in October; the Bank of England, the Bank of Japan, and the European Central Bank will all tighten policy; and US inflation is expected to peak in the second quarter, approaching 3.9%. If these conditions remain largely unchanged, gold prices may trade around $4,100/ounce this year, with a fluctuation range of approximately ±5%. If geopolitical or economic conditions deteriorate, or interest rate expectations shift, gold is expected to resume its upward trend; however, only sufficiently strong signals of a global economic slowdown could drive gold prices to break upwards. On the downside, a stronger dollar, larger-than-expected interest rate hikes, and a recovery in market risk appetite are the main obstacles to gold prices; if gold prices remain below $4,000/ounce, it could trigger further selling. However, based on historical performance, if gold prices fall by more than 10% from current levels, it could trigger "buy the dip" demand from long-term investors in multiple regions.White House National Economic Council Director Hassett: Raising interest rates would be a mistake.UK Maritime Trade Organization: A tanker reported that a small vessel approached it from its port aft side at a distance of 2 nautical miles. The crew is safe and the vessel is continuing its voyage.Ukrainian President Zelensky: I hope that during Irelands EU presidency, I can open up all areas of discussion in the negotiations for Ukraines accession to the EU.British Prime Minister Starmer: The £1 billion annual funding gap in defense spending has been covered by budget "spare space".

USD/CAD declines to 1.3500 on firmer Oil prices, BoC concerns over US inflation, and Fed Minutes

Daniel Rogers

Apr 10, 2023 14:35

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The USD/CAD maintains losses close to 1.3500, shattering a four-day winning trend, as traders brace for key Easter Monday data/events on major bourses. However, the recent decline in the Loonie-U.S. dollar exchange rate may be due to the increase in the price of WTI petroleum oil, Canada's primary export. In contrast to the recent increase in ardent Fed forecasts, the Bank of Canada's (BoC) dovish bias poses a challenge to pair sellers.

 

After increasing for three consecutive weeks, WTI crude oil prices gain 0.61 percent intraday near $80.00. Recent increases in the price of black gold may be due to geopolitical concerns surrounding China and Taiwan. In addition to the supply cut by OPEC+ and the faltering US dollar, the energy benchmark is sustained by the supply cut by OPEC+ and the weakening US dollar.

 

However, the US Dollar Index (DXY) has fallen for three consecutive weeks and is under pressure near 102,000.

 

Fears of higher Fed rates versus inaction from the Bank of Canada (BoC) grew after the upbeat US Jobs report versus the lack of significant positives in the March Canadian jobs report.

 

As a result, the CME's FedWatch Tool indicates a 69% chance of a 0.25 basis point rate hike in May, up from 55% prior to the US employment report.

 

Canada's headline Net Change in Employment increased to 34.7K in March from 21.8K in February, compared to the market consensus of 12K, while the Unemployment Rate came in at 5% versus the analysts' estimate of 5.0%. During the specified month, the Participation Rate decreased to 65.6% from the expected and previous rate of 65.7%. In addition, the average hourly wage fell 5.2% year-over-year in March, down from 5.5% in February.

 

In contrast, the US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) increased by 236K in March, the lowest increase since January 2021 (considering revisions), compared to the expected 240K and the previous 330,000. Additionally, the unemployment rate fell from 3.6% to 3.5%, while the labor force participation rate rose from 62.6% to 62.6%. The annual wage inflation rate decreased from 4.6% to 4.2%, below market expectations of 4.3%.

 

Futures on US equities ended higher, but yields remain under pressure ahead of the crucial BoC monetary policy meeting, US inflation, and Fed Minutes. Given the dovish concerns from the Bank of Canada (BoC) and the likely hawkish comments in the FOMC Minutes, the USD/CAD may see additional gains, barring any unexpected developments.


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