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April 28th - As obstacles to Kevin Warshs confirmation as the next Federal Reserve Chairman appear to be diminishing, markets are reassessing the potential implications of this change. AMP Chief Economist Shane Oliver stated that Warsh is committed to maintaining the Feds independence and may prioritize AI transformation over employment. Oliver said he might also prioritize cut-off mean inflation over core PCE, though this could be seen as a selective approach. Oliver added that his stance might be slightly more dovish than Powells, but not fundamentally different.According to Fox News, U.S. Secretary of State Marco Rubio said that the pressure on Iran is "extraordinary" and that more pressure could be applied.April 28th - Amid escalating geopolitical turmoil, British retailers offered discounts to stimulate consumer spending, helping to cool shop price inflation in the UK in April. The UKs BRC Shop Price Index fell to 1% year-on-year in April from 1.2% in March. Food inflation fell to 3.1% from 3.4% a month earlier, while non-food prices fell 0.1% year-on-year, reversing the 0.1% increase in March. Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), said that retailers intensified price competition in an environment of weakening consumer confidence to stimulate more spring spending. She stated, "While we havent yet seen the full impact of the Middle East conflict on consumer prices, that impact will soon begin to appear."The UKs BRC Shop Price Index rose 1% year-on-year in April, down from 1.20% previously.April 28th - This week is destined to be significant for the Federal Reserve. Following the Justice Departments conclusion of its investigation into Jerome Powell, Republican Senator Tillis withdrew his obstruction of the confirmation process for Fed Chair nominee Dirk Warsh on Sunday. The Senate Banking Committee has scheduled a vote on Warshs nomination for 10 p.m. Beijing time on Wednesday, clearing the way for a full Senate confirmation vote before the week of May 11th. Hours after the nomination vote, the Fed will announce its April interest rate decision, and Powell will hold his 63rd, and likely final, Fed Chair press conference. If Warshs nomination for both Fed Chair and Board of Governors is approved, he will replace Jerome Milan, who temporarily filled the vacancy on the Board of Governors, becoming the shortest-serving official since the 1950s. If Milan fails to rejoin the Fed, he will attend his sixth and final Fed meeting this week, having consistently championed interest rate cuts. The question now is whether Powell will, as is customary, relinquish his Board of Governors seat (which expires on January 31, 2028) upon stepping down as Fed Chair (his term ends on May 15th). If Powell chooses to leave immediately and another of Trumps own appointees fills his vacancy on the Federal Reserve Board, Trump will have four of his own appointees (Woller, Bowman, and Warsh) on the seven-member board. This provides support for Trump to take potentially aggressive measures (including removing regional Fed presidents) to dismantle the Feds traditional structure. Powells final choice will directly influence the pace and extent to which Warsh or Trump reshape the Feds operations.

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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