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July 4th - As the US and Iran reached a peace agreement, releasing a large supply, oil prices fell across the board. Demand was unable to absorb the supply, and the market is once again discussing the issue of oversupply of crude oil. This is a stunning reversal; less than three months ago, the worlds major physical crude oil benchmark prices hit record highs; and just weeks ago, senior industry executives were warning that global inventories had fallen to extremely low levels due to the Iranian crisis. In addition to the immediate impact of the reopening of the Strait of Hormuz, analysts from institutions such as Morgan Stanley and Goldman Sachs have warned this week that the market faces the risk of oversupply next year. Kit Haines, head of oil research at energy consultancy Energy Aspects, said, "The overwhelming sentiment in the market right now is bearish." Even before the US and Iran signed a memorandum of understanding in mid-June to reopen the Strait of Hormuz, suppliers in the Persian Gulf were already increasing shipments. In the weeks following the signing of the agreement, more than 60 million barrels of crude oil that had been trapped due to the outbreak of war flooded the market.According to TASS, the Russian Ministry of Defense stated that its troops are clearing Ukrainian forces from the town of Leman.According to TASS, the Russian Ministry of Defense stated that Russian troops have captured five settlements in eastern Ukraine.July 4th - According to reports from Saudi media outlets Hadas and Al Arabiya, negotiations between the United States and Iran will take place in Pakistan on July 11th to discuss sanctions, frozen Iranian funds, and the nuclear issue. The composition of the Iranian delegation will be determined after Khameneis funeral.According to Saudi media outlets Haddad and Al Arabiya, negotiations between the United States and Iran will take place in Pakistan on July 11.

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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