U.S. stocks were mixed at the start of a busy week for corporate earnings, economic data and Federal Reserve speakers. Treasuries climbed while the dollar was little changed. The S&P 500 Index fluctuated near 3,000 as Citigroup Inc slid after posting worse-than-estimated trading revenue. Steelmakers jumped after Donald Trump's trade aide Peter Navarro said the president will sign an executive order boosting the use of the material in federal government contracts. After the first giant U.S. bank kicked off the earnings season, other heavyweights including JPMorgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc get ready to report their results on Tuesday. Also this week, investors will be sifting through speeches by Federal Reserve officials after Chairman Jerome Powell signaled he stands ready to cut interest rates to bolster growth and lackluster inflation. Investors also assessed data showing that China's economy slowed to the weakest pace since quarterly data began in 1992 amid the ongoing trade standoff with the U.S., while monthly indicators provided signs that a stabilization is emerging.
Garo Mavyan | Retail FX & Precious Metals Trader
In its most recent decision, the Bank of Canada announced that it would leave its key interest rate unchanged at 1.75%. Though anticipated, this outcome marks the sixth straight meeting that the bank has elected to keep the interest rate steady, as it cites the potential for a return to domestic economic growth. The decision seemed to reinforce the perspective of Bank of Canada Governor Stephen Poloz, who for months has maintained that the recent 'soft patch' in the Canadian economy was temporary. Based on recently released data, it would appear that Poloz finally has the evidence he needs to support his view that things are on the rebound: GDP grew by 0.3% on a monthly basis in April to surpass market expectations, Canada's trade balance was in a surplus position in May as exports rose by 4.6%, and the Canadian Dollar has gained about 4.3% on the US Dollar as oil prices continue to climb.
Yesterday, USDCAD moved from 1.3076 down to 1.3041 before briefly climbing to 1.3090. The pairing then declined to 1.3057 in late trade. Overnight, USDCAD dropped to 1.3017, the lowest rate since Oct. 24, 2018. The pairing has moved back up towards 1.3050 this morning. Overall, the USD is fairly stable today after having lost ground for much of this week. The USD has been the worst performing currency this week as dovish comments from Fed Chairman Powell earlier in the week have increased rate cut odds despite the fact that 10 year treasury yields have risen from 1.95% up to 2.15% over the past week towards 1 month highs. Probability of a 50 basis point rate cut by the Fed at the end of the month has risen from 5.4% up to 26.6% this week
U.S. stocks pushed toward new highs and Treasuries retreated after the latest American inflation reading came in hotter than anticipated. The dollar dropped for a second day and gold slipped.
The S&P 500 tested 3,000 again Thursday while the Dow Jones Industrial Average flirted with 27,000 as investors weighed the latest clues on the path for monetary policy. Health-care shares gained after the Trump administration pulled the plug on a proposed overhaul of drug rebates.Federal Reserve Chair Jerome Powell, who struck a dovish tone in questioning before a congressional panel Wednesday, is due back on Capitol Hill today to answer senators' questions. Traders will be eyeing that testimony for further clues after a measure of U.S. consumer prices rose more than forecast in June.
As expected, the Bank of Canada left interest rates unchanged at 1.75%. The USD/CAD pair reversed an early dip to 1.3070 region and spiked to 2-week tops following the announcement. After consolidating in a narrow range through the early part of Wednesday's trading session, the pair came under some intense selling pressure in reaction to the Fed Chair Jerome Powell's dovish sounding remarks in the prepared statement to Congress. The downtick, however, turned out to be short-lived and the pair witnessed a dramatic turnaround, rallying around 60-70 pips. The USD/CAD is now at 1.3115.
U.S. stocks followed European shares lower at the open as markets extended a downbeat start to the week. The dollar strengthened to its highest level since mid-June. The S&P 500 Index declined Tuesday morning as investors await more clues on the path for U.S. monetary policy. Trading may stay choppy ahead of key testimony this week from Federal Reserve Chair Jerome Powell as observers assess prospects for easing following conflicting signals on the global economy. Treasuries slipped, while gold dropped for a fourth day.
After advancing to 1.3130 on Friday following the employment figures from the United States and Canada, the USD/CAD pair retraced a large portion of its gains ahead of the weekend and started the new week under modest bearish pressure. However, the greenback seems to be preserving its strength with the US Dollar Index posting modest gains at 97.30 and suggests that the pair's losses are likely to stay limited. Additionally, the barrel of West Texas Intermediate is consolidating Friday's gains, losing 0.5% on the day around mid-$57s and making it tough for the commodity-linked loonie to gather momentum. In the second half of the day, the subdued trading action is likely to continue in the absence of significant macroeconomic data releases. The next important event for the pair will FOMC Chairman Powell's speech on Tuesday. Although he is supposed to deliver prepared remarks on the effectiveness of stress testing on large banks at an event organized by the Federal Reserve Bank of Boston, investors will be looking for clues regarding the policy outlook. Canadian economic docket will feature housing starts and building permits data tomorrow as well
The USD/CAD pair gained nearly 70 pips in a matter of minutes following the employment data releases from Canada and the U.S. to touch its highest level of the day at 1.3138. In Canada the unemployment rate rose to 5.5% in June amid a 2,200 decrease in the number employed and weighed on the loonie. In the U.S. non-farm payrolls increased by 224k in June to surpass the market expectation of 160k by a wide margin. The press release also showed that the wage inflation, as measured by the average hourly earnings, stayed unchanged at 3.1%. The U.S. labour market is on fire and the Federal Reserve officials can sit back and enjoy the fireworks. While the central bank is set to cut interest rates as the end of the month, the upbeat non-farm payrolls diminish the chances of a deep cut of 50 basis points that investors have wished for.
European equities and U.S. stock futures edged higher on Thursday in a lackluster session marked by thin trading volumes thanks to the American holiday. Gold slipped but stayed above $1,400 and WTI futures fell. The Stoxx Europe 600 Index turned modestly higher, with real estate firms and telecoms boosting the gauge. Contracts on the S&P 500 Index also nudged up after Asia's benchmark finished higher overall thanks to gains in Japan and South Korea. Trading volumes were well below average across the board, with U.S. markets shut and investors counting down to Friday's American jobs report.
U.S. stocks advanced to fresh records in thin trading ahead of the holiday tomorrow in the States. The rally in global bonds extended as investors weighed the prospect of more dovish appointees to two of the world's major central banks. The USD fell after jobless claims came in broadly as forecast and private hiring numbers missed expectations. A reading on the services sector fell to the lowest since 2017, but Wednesday's batch of data did little to move markets, with jobs numbers coming Friday. Europe's leaders have nominated Christine Lagarde to take the helm of the ECB later this year, ushering in a candidate analysts anticipate will take up departing President Mario Draghi's mantle in providing stimulus. And U.S. President Donald Trump said he's planning to nominate Christopher Waller and Judy Shelton to serve on the Fed Board, candidates both seen as likely to advocate lower interest rates. Meanwhile, Cleveland Fed President Loretta Mester said she'd need to see more data before supporting an immediate rate cut, while many of her colleagues are leaning toward loosening policy. Elsewhere, oil rebounded after tumbling Tuesday. Shares in Japan, China and South Korea led losses in Asia as equities in Australia edged higher. The yen strengthened after the Bank of Japan made small tweaks to its bond buying program.
U.S. stocks rallied to all-time highs after a trade truce with China, though finished well off highs of the day as measures of manufacturing activity showed growth slowing in the world's largest economy. Treasuries fell with gold. The S&P 500 ended at a record for the first time in 10 days, led by a surge in chipmakers after President Donald Trump agreed to ease a ban on American companies supplying Chinese tech giant Huawei. The Nasdaq 100 hit a two-month high. Industrial shares underperformed, as a U.S. manufacturing gauge showed orders stalled last month.
Yesterday, USDCAD moved from 1.3116 up to 1.3139 before falling to 1.3090. Since peaking at 1.3567 on May 31(within 1 cent of a 2 year high) USDCAD has fallen nearly 5 cents towards an 8 month low. Canadian GDP data beat estimates this morning sending USDCAD down to 1.3068 – the lowest level since Feb. 1 / 2019 and Nov. 7th / 2018. There has since been a move up to 1.3100 followed by a decline to 1.3080. The USD is broadly weaker today and is the worst performing currency this week and month as the USD index trades near 5 month lows. The market now awaits any trade related comments from this weekend's G20 Summit in Japan.
U.S. stocks rose as investors speculated the Trump administration would avoid escalating its trade war with China this weekend at the G 20 meeting. U.S. Treasuries advanced while oil slipped from its highs. Meanwhile U.S. Initial jobless claims came in at a 7 week high.
The USD has dropped this morning to its lowest level since Feb.27th after a larger than expected draw in crude oil. The S&P 500 pared early gains as health-care shares and consumer staples weighed on benchmarks. Futures spiked overnight after CNBC report that Treasury Secretary Steven Mnuchin said a trade deal was 90% done. The report was corrected to indicate that the comments referred to May. Ten-year Treasury yields pushed above 2%, while oil rose to a 4-week high on supply concerns, and gold retreated. While the administration's trade comment revived risk appetite, a major breakthrough may not come during the weekend's meeting between Presidents Donald Trump and Xi Jinping. Trump once again threatened Wednesday substantial additional tariffs if a deal can't be reached. Meanwhile, many traders hope the Federal Reserve will mitigate any headwinds to global growth with deep cuts, though Fed member James Bullard made clear Tuesday that's not a given.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The CAD was the best preforming currency this week with the EURO a close second. The USD was the worst performing currency with losses intensifying after Wednesday's dovish U.S. Fed statement and down-graded inflation forecast. USDCAD opened the week near 1.3433 and dropped to 1.3365 on Tuesday as talks of further easing by the European Central bank and an expected dovish U.S. Fed spurred global equity markets with the DJIA soaring nearly 500pts to new historical highs. USDCAD dropped from 1.3384 down to 1.3337 Wednesday morning after stronger than expected Canadian inflation data essentially erased any chance of an interest rate cut by the Bank of Canada. The U.S. Fed kept rates unchanged but opened the door for two interest rate cuts by the end of 2020 according to the Fed dot plot. Inflation expectations were revised lower – from 1.8% down to just 1.5% for 2019. The market is now pricing in a 71% probability of a 0.25% rate cut and a 29% chance of a 0.50% rate cut at the July 30 U.S. Fed (FOMC) meeting. Just 1 month ago, the probability that rates would be kept unchanged was 82%. USDCAD dropped to 1.3260 – just above last week's 1.3242 low. Broad USD weakness continued Thursday as equity markets pushed higher and oil prices jumped 3% as U.S. / Iran tensions escalated. USDCAD dropped to 1.3150 – the lowest level since Mar.1 and within 1 cent of an 8 month low. On Friday, Canadian retail sales were largely as expected while gold broke the $1,400 level to trade near 6 year highs. Oil prices tested the $58 level – having gained 14% over the past 8 days. The USD index fell to a 3 month low while U.S. 10 year yields rebounded back above 2.00% after having fallen to 1.97% / 3 year lows on Thursday. USDCAD climbed from 1.3162 up to 1.3230 and closed the week near 1.3220.
U.S. stocks fell while gains in Treasuries pushed the 10-year yield below 2% as simmering geopolitical tensions damped investor appetite for risk. Gold jumped. The S&P 500 dropped for a third-straight session as U.S. officials downplayed expectations ahead of highly-anticipated meeting between President Donald Trump and China's Xi Jinping this week. The 10-year Treasury yield slipped back below 2%, a level that until last week it hadn't breached since 2016, ahead of a speech by Federal Reserve Chair Jerome Powell Tuesday afternoon. West Texas oil rose as investors weighed escalating tensions between the U.S. and Iran against the possibility of OPEC+ extending production cuts. Gold jumped to the highest in six years and the yen hit the strongest since January against the dollar. German bunds fell to a record.
U.S. equities fluctuated near records as investors weighed expectation for easier monetary policy against rising tensions in the Middle East. Treasuries advanced, while the dollar edged lower. Investors in risk assets have continued to shrug off signs of a global economic slowdown and focus on the increasingly dovish tone at the central banks around the world. That attention will intensify Tuesday when Fed Chair Jerome Powell discusses monetary policy. But sentiment could be at a crossroads as the conflict between the U.S and Iran has ramped up, and the meeting between China's President Xi Jinping and Trump this week at the Group 20 conference in Japan presents a pivot for trade relations between the 2 counties.
Yesterday, USDCAD dropped from 1.3390 down to 1.3151 – a 4 month low before rebounding briefly to 1.3222. The pairing then eased lower towards 1.3180 in late trade. The USD sell-off continued in early Asian trade as gold jumped to $1,411 – a 6 year high while the USD index dropped towards 3 month lows. USDCAD fell to 1.3162 before climbing back to 1.3200 ahead of the Canadian retail sales data. There was little market reaction after the release as the headline miss was offset by a positive revision to prior data. USDCAD has since revisited yesterday's NA session high of 1.3222 before falling back to 1.3210.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.caThe USD was the best preforming currency this week after having closed last week near 3 month lows. USDCAD initially gapped lower at the open (from 1.3265 down to 1.3242) in reaction to Trump's announcement that he would not place tariffs on Mexico. The pairing held a fairly narrow 1.3250 – 1.3309 range through mid-day Wednesday before climbing to 1.3345. Trade tensions re-surfaced on Wednesday with equity markets moving lower. Oil prices also plunged as much as 7% towards a 5 month low from Monday's levels. On Thursday, oil prices rebounded by 5% briefly sending USDCAD back down to 1.3300. The USD moved up sharply on Friday after the release of U.S. retail sales and industrial production data. The USD index climbed to a 1 week high as did USDCAD – eventually closing the week near the highs just above 1.3400. Recent U.S. data has largely disappointed fueling calls for the Fed to lower its key interest rate. Friday's data showed improvement with notable positive revisions to prior data. Oddly enough, the U.S. 10 year yield failed to recover and remained anchored near 3 year lows @ 2.08%. The market now awaits the key U.S. Fed interest rate announcement out at 11:00am, Wednesday June 19th. There is a slight possibility they will cut interest rates. If rates are held unchanged, look for rhetoric to suggest potential cuts in the near future.
U.S. stocks surged to a record, while sovereign bonds worldwide extended gains and the dollar tumbled as the Federal Reserve's dovish shift reverberated through global markets. Gold rose to the highest in more than 5 years as Iran shot down a U.S. drone, stoking tensions in the Gulf and propping up oil.