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June 19, Rancesco Pesole, a foreign exchange strategist at ING Bank, said that the problem now is that the Bank of England decided not to provide any forward guidance. This means that the market needs to interpret the details very carefully to judge the direction of policy or assess the timing of the next interest rate cut. The past month has been quite bad for the UK, with performance below expectations in all aspects, inflation slightly below expectations, and weak economic growth... For the Bank of England, all this seems predictable. The yield curve has not changed much because it basically recognizes the markets expectations, that is, one meeting to keep interest rates unchanged and one meeting to cut interest rates.Bank of England Governor Bailey: The statement that we expect interest rates to gradually fall does not represent a forecast for August.On June 19, David Kelly, chief global strategist at JPMorgan Asset Management, said that the Federal Reserve may keep interest rates unchanged until the end of this year. He pointed out that if inflation is expected to rise due to tariffs, it will not subside until 2026. "By the end of next year, the economy should cool down. Inflation should cool down, and maybe they will give us some lower interest rates." "Now, dont hold your breath for low interest rates from the Federal Reserve, because they dont seem to have any intention of providing low interest rates."Gazprom CEO meets with Hungarian Foreign Minister.On June 19, Nick Rees, head of macro research at Monex, said that the Bank of England still seems to be sticking to the rhythm of cutting interest rates once a quarter. Although some comments have begun to downplay the rate of interest rate cuts originally proposed by Bailey, although this may not be an official statement, it seems to be their plan. The biggest highlight of this meeting was the 6-3 vote difference. This is dovish in the market consensus, and the market will interpret the signal from it, but I think it will have limited impact on the specific actions of the Bank of England in the future.

With eyes on Fed's Powell and BoC's Mackem, USD/CAD falls toward 1.3400 as oil prices rise

Alina Haynes

Feb 07, 2023 15:56

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Tuesday morning's trading near 1.3430 represents the first negative daily performance in four days for the USD/CAD pair, extending losses near the intraday low. Despite this, the Loonie pair remains close to 12-day highs as traders await comments from Governor Tiff Macklem of the Bank of Canada (BoC) and Chairman Jerome Powell of the Federal Reserve (Fed).

 

The recent decline of the quote may be related to the market's cautious optimism in light of receding economic fears. The strengthening of WTI crude oil prices, Canada's principal export commodity, might exacerbate the downturn.

 

WTI crude oil rises 0.40 percent to $75.00, extending yesterday's rebound from a two-month low. The recovery of the price of black gold may be related to diminishing fears of an economic slowdown in the United States as well as recent positive news reports regarding Sino-American ties.

 

Even though the US economic calendar was fairly silent, Treasury Secretary Janet Yellen and President Joe Biden's growth optimism appeared to weigh on US Dollar bulls. Despite this, it appears that hawkish Fed deliberations strengthen US Treasury bond yields and the US Dollar. In an interview with Bloomberg, Federal Reserve Bank of Atlanta President Raphael Bostic noted, "The robust job market likely indicates 'we have a little bit more work to do.'"

 

A dash on the US diplomatic visit to Beijing and China's angry response to the US shooting down its balloon by labeling it as a spying attempt triggered the market's risk-off mentality and lifted the USD/CAD pair the day before. Recent comments by US Vice President Joe Biden appear reassuring, as he noted, "The balloon incident does not impair US-China relations."

 

After a two-day rebound from the monthly low, the 10-year US Treasury bond struggled for direction at 3.63%, while S&P 500 Futures saw minor gains reflecting the prevalent sentiment.

 

Moreover, bullish readings of the Canada Ivey Purchasing Managers Index for January, 60.1, compared to 55.2 expected and 49.9 prior, appear to exert downward pressure on the USD/CAD exchange rate.

 

Future USD/CAD traders may react swiftly to the December Canadian trade statistics. However, the words of Bank of Canada Governor Macklem, Federal Reserve Chairman Jerome Powell, and US Vice President Joe Biden's State of the Union (SOTU) address will be crucial for providing clear directives.


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