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On February 9th, GivTrade strategist Hassan Fawaz noted in a report that given recent signs of a cooling US job market, any significant deviation from expectations in the January non-farm payroll data could trigger sharp fluctuations in the foreign exchange and bond markets. He stated, "If the data is weaker than expected, it could reignite market concerns about labor market momentum, strengthen expectations of monetary policy easing later this year, and thus put downward pressure on the dollar." He also pointed out that strong data could challenge these expectations, supporting the dollar and pushing up yields.On February 9th, Ray Farris, Chief Economist at Eastspring Investments, noted in a report that Prime Minister Sanae Takaichis election victory is seen as positive for the Japanese stock market. He anticipates Takaichi will adopt a more expansionary fiscal stance, including abolishing the consumption tax and increasing defense spending. Farris added that any new fiscal stimulus measures could boost the economy and extend the growth cycle. He expects corporate earnings forecasts for 2027 to be revised upwards, and the proposed consumption tax cut could take effect in April 2027. However, additional stimulus measures will push up Japanese government bond yields, with the 10-year yield expected to rise above 2.4% in the coming quarters. This will support underlying inflation and could potentially slow or reverse the recent decline in public debt.Citigroup raised its price target for Phillips 66 (PSX.N) from $146 to $159.Citigroup raised its price target for Valero Energy (VLO.N) from $190 to $212.February 9th - Pansen Macroeconomics analyst Anchita Amayuri noted in a report that Eurozone investors believe the economic recovery has finally begun. The Sentix investor confidence index surged to 4.2 in February from -1.8 in January, far exceeding market expectations and reaching its highest level since July 2025. This growth was driven by a simultaneous rise in both the current conditions index and the expectations index. Amayuri stated that investors "extreme confidence" in the German economy also boosted overall sentiment. "We continue to expect German GDP growth to accelerate further this quarter as expansionary fiscal policies aimed at increasing defense and infrastructure spending begin to take effect," she said.

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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