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April 22 – According to a Reuters poll of economists, the Federal Reserve will likely wait at least six months before lowering interest rates this year, as the energy shock triggered by war has further exacerbated already high inflation. In the April 17-21 survey, 56 of the 103 economists surveyed predicted that the Feds benchmark interest rate would remain in the 3.50% to 3.75% range until the end of September. In a survey conducted in late March, nearly 70% of economists expected at least one rate cut by then. In an early March survey, most economists expected a rate cut by the end of June. In the latest survey, 71 economists still expect at least one rate cut this year, with the median forecast indicating only one cut, consistent with the Feds dot plot projections released last month. Currently, nearly one-third of economists expect interest rates to remain unchanged this year, almost double the percentage in previous surveys.European Central Bank Chief Economist Lane: Until we know more about how long this war will last, it is difficult to judge whether this is just a temporary phase or a larger shock.A Reuters poll showed that 71 out of 103 economists expect the Federal Reserve to cut interest rates at least once this year.A Reuters poll of 103 economists found that 56 believe the Federal Reserve will keep the federal funds rate in the 3.50%-3.75% range until September (in a late March poll, 56 out of 82 economists predicted at least one rate cut in September).Iranian Foreign Ministry spokesman: The maritime blockade of Iranian ports continues, which is an aggressive measure.

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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