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Newsquawk Week Ahead Preview: US FOMC, ISM, NFP; BoE, RBA, OPEC+

223368   April 30, 2022 23:40   Forexlive Latest News   Market News  

• SUN:
  Chinese Labour Day Holiday (May 1-4).
• MON:
  German Industrial Orders (Mar) and Retail Sales (Mar); EZ, and US Final
  Manufacturing PMIs (Apr); US ISM Manufacturing PMI (Apr); UK Bank Holiday;
  Japanese Holiday.
• TUE: RBA
  Announcement; South Korean CPI; German Unemployment (Apr); EZ Producer
  Prices (Mar); US Durable Goods (Mar); UK Final Manufacturing PMI (Apr);
  New Zealand Jobs Report; Eurogroup Meeting; Japanese Holiday.
• WED: FOMC
  Announcement; US Refunding; BCB Announcement; German Trade Balance (Mar);
  EZ, UK, and US Final Services and Composite PMIs (Apr); EZ Retail Sales
  (Mar), US ADP National Employment (Apr); Canadian Trade Balance (Mar); ISM
  Services PMI (Apr); OPEC JTC; Japanese Holiday.
• THU: BoE
  Announcement; Norges Bank Announcement; NPB Announcement; CNB
  Announcement; JMMC/OPEC+ Meeting; Australian Trade Balance (Mar); Chinese
  Caixin PMI Services PMI (Apr); Swiss CPI (Apr).
• FRI:
  German Industrial Orders (Mar) and Retail Sales (Mar); EZ, UK, and US
  Final Manufacturing PMIs (Apr); US Jobs Report; Canadian Jobs Report.

NOTE: Previews are listed in day-order

US ISM manufacturing PMI (Mon), ISM services PMI (Wed): The Manufacturing
ISM is expected to rise to 58.0 in April from 57.1 in March. Credit Suisse,
which is against the consensus view, looks for a decline to 56.5. The bank
writes that although the S&P Global PMIs have improved recently, many
regional surveys within the US have been turning lower this year. Credit Suisse
adds that the Production and New Orders sub-indices have been underperforming,
while it argues that the headline itself has been supported by the ongoing
supply chain disruptions, which has underpinned the Supplier Deliveries
sub-index; “We expect this trend to continue as COVID shutdowns in China
and Russia’s invasion of Ukraine threaten new global supply disruptions,”
CS writes; it also expects to see ongoing weakness in manufacturing surveys in
the months ahead. Meanwhile, the services gauge is likely to pick-up to 59.0
from 58.3, according to analyst forecasts.

RBA announcement (Tue): The RBA will decide on rates next week in what is
widely viewed as a live meeting with swaps traders fully pricing in a 15bps
increase for the Cash Rate Target to 0.25% from the current record low of
0.10%, while swap markets also suggested a 25% chance of a greater 40bps move.
The expectation for a sooner lift-off was spurred after the mostly firmer than
expected inflation data for Q1 which showed headline annual inflation at 5.1%
vs. Exp. 4.6% (Prev. 3.5%) which is the fastest pace of increase in more than
two decades and the RBA’s preferred trimmed mean inflation also surpassed the
central bank’s 2-3% target at 3.7% vs. Exp. 3.4% (Prev. 2.6%). This prompted an
adjustment of rate hike expectations with JPMorgan anticipating the RBA to hike
by 15bps in May and Westpac also brought forward its rate hike call in which it
now expects a 15bps increase at next week’s meeting followed by a 25bps move in
June from a previous forecast of a 40bps increase in June. The RBA have opened
the door for a sooner hike after having dropped its reference to the Board
being “patient” from the statement at the last meeting and noted that
developments have brought forward the likely timing of first rate hike, while
it also stated in the recent semi-annual Financial Stability Review that it is
important borrowers are prepared for an increase to interest rates. Conversely,
others are not convinced of a move at the upcoming meeting with Goldman Sachs
and Capital Economics in the June lift-off camp, while arguments for a pause
include the RBA’s previous desire to wait for data over the coming months and
with Australians set to go to the polls for the election on May 21st.

New Zealand jobs report (Tue): There are currently no market expectations for
the Kiwi Labour Force Report, but the release will not likely sway the course
of RBNZ monetary policy, with a 100% chance of a 25bps priced in alongside an
above-80% chance of a 50bps hike. Analysts at Westpac nonetheless expect the
employment change of +0.2% and the unemployment rate to decline to 3.0% from
3.2%. “Labour market indicators point to a further tightening in the market in
recent months, albeit with some disruptions from the Omicron wave. The bank
acknowledges its forecast is a modest upside surprise to the RBNZ’s view.

FOMC announcement (Wed): The FOMC is expected to lift rates by a 50bps
increment, taking the Federal Funds Rate target to 0.75-1.00%. Its March
statement laid the groundwork for such a move (“anticipates that ongoing
increases in the target range will be appropriate” – a line which is expected
to be stated again in May). Additionally, remarks from officials before they entered
the pre-meeting quiet period framed the Fed’s task as firmly in the
inflation-fighting sphere, with Chair Powell stating that it was “absolutely
essential” to restore price stability. Officials have also spoken about
“expeditiously” getting rates back to neutral (judged to be around 2.4%,
according to the Fed’s recent forecasts), which has built expectations for a
front-loaded rate cycle. Accordingly, money markets are now pricing 50bps rate
hikes at the May, June and July FOMC meetings; markets have also priced in the
Federal Funds Rate target rising to 2.50-2.75% by the end of this year (vs the
Fed’s March forecasts, which pencilled in rates rising to 1.75-2.00% by
end-2022). Elsewhere, the central bank may also announce the beginning of its
balance sheet runoff. The minutes from the March meeting flagged that the
process of quantitative tightening will begin at an upcoming meeting, while
there was also a discussion about the cap amounts that the Fed will allow to
roll-off the balance sheet on a monthly basis – the minutes suggested USD 60bln
for Treasuries and USD 35bln for MBS holdings. Some desks think that these caps
will be hit early, but the rising rate environment and lower mortgages
refinancing could mean that only around USD 20bln or so rolls off on an average
month. And given that the Fed wants its balance sheet to eventually be
comprised primarily of Treasuries, traders will be paying attention to see any
timelines of when the Fed is prepared to begin outright selling of its mortgage
holdings to lower the size of the overall balance sheet. Additionally, in light
of advanced Q1 GDP data this week, which showed a contraction of 1.4%, the
Chair will likely be asked the extent to which the Fed is comfortable
tightening policy in the face of slowing growth, and if it would be prepared to
engineer a recession to manage price pressures.

US quarterly refunding announcement (Wed): The quarterly
refunding announcement (08:30EDT/13:30BST) will be made hours before the FOMC
rate decision (14:00EDT/19:00BST), where the central bank is expected to lift
rates by 50bps, but crucially, many also expect it will announce the beginning
of quantitative tightening. UBS argues that the Fed will signal QT, while the
Treasury will outline how it will be financed. The key question for fixed
income traders is whether the Treasury continues to cut coupon issuance in the
face of the buying gap from the Fed. “Treasury’s decision will only be on the
level of coupon issuance for the next three months,” UBS writes, “however, it will
probably also signal how it plans to implement its financing over the coming
quarters when QT will be in full swing.” Since the February refunding
announcement, where it cut auction sizes and signalled further cuts ahead, UBS
notes that the fiscal outlook has improved after a strong tax season;
“therefore, we think that Treasury will go ahead with cutting nominal auction
sizes for the 7y, 10y, 20y, 30y, and FRN,” adding that the cuts for the 7yr and
20yr sectors are likely to be more aggressive to address supply and demand
imbalances. “We think that these additional cuts to nominals will lead to
a continued decline in the amount of nominal duration that the private sector
absorbs this year,” the bank says, “we expect the supply of nominal
duration to the private sector to drop by 29% in 2022 Y/Y, and another 14% in
2023 due to a decline in the total net issuance of fixed-coupon nominals to the
private sector from USD 1.7trln in 2021 to USD 1.5trln in 2022, and cut further
to USD 1.1trln in 2023.” Meanwhile, UBS sees the net issuance of TIPS to
the private sector increasing from USD -17bln in 2022 to USD +61bln in 2023,
and USD +75bln in 2023.

BoE announcement (THU): The BoE is expected to continue its hiking cycle
at the upcoming meeting by delivering another 25bps hike, taking the Base Rate
to 1.0%. 33/44 surveyed analysts expect a 25bps hike, 1 expects a 50bps hike
and 10 look for no change. In terms of market pricing, 27bps of tightening is
priced in for the upcoming meeting with an additional five hikes priced in by
the end of the year. The previous decision was subject to dovish dissent from
Cunliffe who voted for a pause in the hiking cycle on account of concerns over
the current squeeze on real household incomes. This time around, the vote split
is expected to remain 8-1 with no other MPC members set to join Cunliffe in the
pause camp given that the consensus amongst policymakers is set to prompt just
a 25bps hike compared to the 50bps that the Fed is likely to proceed with next
week. The meeting comes amidst the backdrop of rampant inflation in the UK with
the Y/Y CPI metric rising to 7.0% in March from 6.2% ahead of the inclusion of
the OFGEM price cap hike in April. Furthermore, the CBI reports that
manufacturers are raising prices at the fastest rate in over 40 years to cover
rising raw material and energy input costs. The labour market remains hot with
the unemployment rate at multi-decade lows whilst wage growth remains elevated.
Of concern, GDP metrics for Feb saw a cooling in the pace of Q/Q growth to 0.1%
vs. the 0.8% observed in January whilst March’s retail sales report was
particularly soft with ING noting that “it’s getting increasingly difficult to
see how UK consumer spending avoids a downturn over coming months”. With this
in mind, Governor Bailey has cautioned that the BoE is walking a tightrope
between tackling inflation and avoiding a recession. With a rate hike a near
given for the Bank, focus will turn towards signalling for the coming months.
In the previous statement, the Bank tweaked guidance so that it reads “modest
tightening in monetary policy may be appropriate in the coming months” as
opposed to the February statement which noted it is “likely to be”. Any further
softening of forward guidance on rates will be of note given how aggressive
market pricing remains. SGH Macro suggests that the Bank is on the precipice of
what it describes as “a ‘second phase’ of tightening, characterized by less
frequent moves over a longer time horizon, with data dictating
meeting-to-meeting outcomes”. Elsewhere, current guidance from the BoE suggests
that it will actively start selling Gilts when the Bank Rate hits 1%. However,
policymakers have stated that selling Gilts when the Bank Rate hits 1% will not
be an automatic process. ING thinks now is not the best time to sell bonds and
therefore will hold off and instead opt to lay out details of how the policy
could work when implemented. In the accompanying MPR, inflation and growth
forecasts are set to be revised higher and lower respectively.

Norges Bank announcement (Thu): While the consensus continues to expect the
Norges Bank will leave rates unchanged at 0.75%, a surprising hawkish pivot by
its local peer, the Riksbank, has resulted in some analysts revising their own
expectations towards a more hawkish outturn. That said, the meeting is one of
the so-called intermediate confabs, so we will not get any updated economic
projections or rate path, and according to the Scandi bank SEB, we should still
be expecting an unchanged rate decision. “While recent developments have been
mixed, there are no substantial deviations from the Bank’s projections that
would support a policy shift,” it writes, and SEB thinks the central bank will
reiterate its guidance that “the policy rate will most likely be raised further
in June”, and SEB doesn’t even expect any fresh policy signals. “The market’s
hiking expectations are a tad more aggressive than implied by the rate path,
but the upcoming rate announcement should not result in any large market
moves,” it writes.

JMMC/OPEC+ (Thu): OPEC+ producers next week are expected to stick to their output plans,
which would see the June quota upped by 432k BPD under the agreement, also
backed by recent sources. The meeting comes against the backdrop of the ongoing
Russia-Ukraine war, with Western nations attempting to phase out their
dependence on Russian energy. Meanwhile, China’s COVID situation remains a
concern due to the government’s zero-COVID policy – which has dealt a blow to
the demand side of the equation whenever a city sees a resurgence in cases –
with Shanghai and Beijing currently on watch. China’s developments will likely
be the reason for the producer to express caution with regard to Western
desires for higher output quotas than planned. Further, ministers will likely have
to address the group’s over-compliance at some point as it produced 1.45mln BPD
below its March target (with data showing declines in Russian output), although
there is nothing to suggest that this issue will be picked up at this meeting.
All-in-all, everything currently points to another smooth set of meetings on
May 5th.

Australian trade balance (Thu): Headline trade balance for March is expected to
expand to a surplus of AUD 8.5bn from AUD 7.5bln the month before. The metric
will not change the course of RBA monetary policy with the calls growing for
the central bank to hike in May. Westpac expects imports to pull back following
the surge in February, whilst exports are seen leading the exports.

US jobs report (Fri): The consensus currently expects 400k nonfarm
payrolls will be added to the US economy in April (vs prior 431k; 3-month
average 562k, 6-month average 600k, 12-month average 541k). The weekly data for
the week that usually coincides with the reference period for the establishment
survey showed initial jobless claims rising to 185k from 177k heading into the
March jobs report, although the four-week average slipped to 177.5k from
188.75k; continuing claims eased to 1.408mln from 1.542mln, with the four-week
average also falling. With the Fed more concerned about the inflation part of
its mandate, rather than the employment side, there will be much attention on
the average hourly earnings metrics, which are seen rising by 0.4% M/M
(matching the March rate). That said, the Fed is likely to lift the Federal
Funds Target rate by a 50bps increment at next week’s confab; in fact, money
markets have priced 50bps in May, June and July.

This article originally appeared on Newsquawk.

Analysts are bullish on Ethereum as 12 million ETH is staked on the consensus layer

223367   April 30, 2022 21:40   FXStreet   Market News  

• 12 million ETH tokens have now been staked on the consensus layer, hitting a key milestone for the altcoin. 
• Proponents believe that a high volume of staked Ethereum is a bullish sign and could fuel a rally in the altcoin. 
• Ethereum’s revenue increased 46% in Q1 2022 as the altcoin gained popularity among users. 

Ethereum price volatility has increased uncertainty among investors. However, analysts are bullish on Ethereum and predict a rally in the altcoin. 

Ethereum price could wipe out its losses on one condition

Ethereum consensus layer now has 12 million ETH tokens staked on it. A rise in the staked supply of Ethereum reduces its circulating supply. A reduction in circulating supply is bullish for the altcoin’s price. 

After witnessing volatility in its price, Ethereum is on track to recover its losses. Based on data from Glassnode, the exchange netflow volume is at 6,244 ETH. This represents a bullish bias among investors. 

@venturefounder, a crypto analyst and trader, commented to Ethereum’s net exchange flow. 

Proponents believe investors are bullish on Ethereum because of the much-anticipated merge. The consensus layer deposit contract recently surpassed 12 million ETH tokens, accounting for over 10% of ETH supply in circulation. 

$34 billion in ETH is now pulled out of Ethereum’s circulating supply, and over 376,000 validators contributed to the same in transactions worth 32 ETH or more. Analysts believe Ethereum price could overcome a 55-day SMA, a key level to confirm bullish bias. 

Analysts have identified $3,018.55 as a critical barrier for bulls attempting to make a recovery. If Ethereum price drops below $2,800, analysts have set a downside target of $2,695.79. 

FXStreet analysts have identified a buying spree among Ethereum whales, scooping up ETH off of exchanges in a bullish move. 

XRP price remains unfazed by the SEC’s legal battle with payment giant Ripple

223366   April 30, 2022 19:45   FXStreet   Market News  

• XRP price remained largely unaffected by updates in the SEC’s battle with payment giant Ripple. 
• In a recent interview with Bloomberg, Ripple CEO Brad Garlinghouse remained unfazed by the SEC’s progress in its lawsuit against the payment giant. 
• Analysts predict recovery in XRP price, as the altcoin continues its recovery. 

XRP price is currently 13.7% lower compared to last week, however proponents argue Ripple is unfazed by the SEC’s lawsuit. The altcoin is on track to begin its recovery. 

Ripple CEO unfazed by the SEC’s position in the lawsuit 

Brad Garlinghouse, the CEO of Ripple recently told Bloomberg in an interview that the payment giant can continue doing business as usual. Garlinghouse believes that the US is the only country that classifies XRP as a security.

XRP was hit by the SEC’s lawsuit when the altcoin suffered a slew of delistings from cryptocurrency platforms and exchanges. Despite the lawsuit and the aftermath, XRP price recovered and resumed its uptrend. 

Proponents argue that the recent updates in the SEC vs. Ripple case do not influence XRP’s price negatively. Therefore, XRP price could continue its recovery irrespective of the outcome of the SEC vs. Ripple case. 

The regulator has pocketed small wins along the way in its lawsuit against XRP and the altcoin is currently in a phase of consolidation. However, the rising commercial utility and Ripple’s latest rebrand initiative could drive demand for the altcoin higher. 

Irrespective of Ripple’s win, loss or settlement in the SEC’s case against it, XRP price could recover from its pullback and wipe out losses of investors. 

Analysts at @IncomeSharks have identified a short setup in XRP’s current price trend. Before starting a climb, XRP could find support lower than the downside target of $0.61, unless buyers line up on exchanges to fuel the altcoin’s recovery. 

Analysts believe Dogecoin is superior to Bitcoin for this reason

223365   April 30, 2022 18:35   FXStreet   Market News  

• Roger Ver, a popular Bitcoin proponent and analyst has come out in favor of Dogecoin, and believes DOGE could dominante BTC. 
• Ver explained that he has shifted his focus away from Bitcoin to Dogecoin and Bitcoin Cash. 
• Analysts are awaiting retail participation to fuel a Dogecoin price rally. 

A popular Bitcoin proponent has come out in favor of Dogecoin. Roger Ver argues that Bitcoin is superior to Dogecoin and supports Elon Musk’s bid to buy Twitter. 

Ver shifts sides, considers Dogecoin superior to BTC

Roger Ver, a leading crypto analyst is popular in the crypto community as “Bitcoin Jesus.” The analyst recently returned to social media after a break and shared his thoughts on Dogecoin. The analyst believes Dogecoin is superior to Bitcoin since the billionaire CEO of Tesla, a renowned proponent of DOGE recently acquired Twitter. 

Ver supports Musk’s decision and believes DOGE could find utility in Twitter. Interestingly, Ver believes Dogecoin is superior to Bitcoin and other cryptocurrencies. Ver argues that if regular people use custodial wallets, Bitcoin will have lost the one key property, privacy, that made it revolutionary. 

This would imply Dogecoin offers its users and holders higher utility, decentralization and ease of use, compared to most other cryptocurrencies, making it a superior choice. Custodial wallets violate the principle of privacy. 

Most centralized exchanges and custodial wallets require verification of the user’s identity, violating the principle that differentiates Bitcoin from other cryptocurrencies. For these reasons, Ver has shifted his focus from Bitcoin to Dogecoin and Bitcoin Cash. 

@AltcoinSherpa, a crypto analyst and trader believes Dogecoin price rally is not sustainable. The analyst’s opinion is that strong retail participation, close to the end of a cycle is the ideal time for a DOGE price rally. 

Shiba Inu and Dogecoin compete for position of largest meme coin as SHIB flips DOGE

223364   April 30, 2022 16:12   FXStreet   Market News  

• As the meme coin started an uptrend, Shiba Inu recently took over Dogecoin in market capitalization. 
• Burger joint Welly says that the Shiba Inu community will have a stake in its business, fueling a bullish sentiment among holders. 
• Analysts believe Shiba Inu price could continue consolidation within a triangle pattern before breaking out. 

Shiba Inu recently surpassed Dogecoin in market capitalization. Analysts believe Shiba Inu is on track to recovery from its ongoing consolidation. 

Shiba Inu and Dogecoin compete for meme coin market share

Shiba Inu and Dogecoin are neck and neck in the meme coin market, competing for higher share. Proponents noted that Shiba Inu recently surpassed Dogecoin’s market capitalization, flipping DOGE momentarily. 

This event has fueled a bullish narrative among investors. Shiba Inu has surpassed Dogecoin’s market capitalization in the past, triggering a price rally in the meme coin. Proponents have identified another critical catalyst for Shiba Inu’s price rally. 

The burger joint Welly that rebranded itself to accept Shiba Inu as payment has announced that the community will have a stake in its business. Welly announced that the community would be entitled to a portion of profits from all activities. The community can then decide whether to burn Shiba Inu tokens or use them for some other purpose. 

Holders of Shiba Inu would manage their tokens with the help of BONE DAO. Analysts have evaluated the Shiba Inu price trend and predicted a continuation of the consolidation. Valeria Blokhina, a crypto analyst and trader, noted that Shiba Inu price has consolidated within a triangle for some time now. The meme coin could continue before a breakout. 

Additionally, Welly has partnered with crypto payments company NOWPayments, planning to burn a certain percentage of their revenue in SHIB tokens. @AltcoinSherpa, a pseudonymous crypto analyst and trader, does not recommend buying Shiba Inu. 

China PMIs for April 2022 have been published – all are well into contraction

223362   April 30, 2022 13:12   Forexlive Latest News   Market News  

China official PMIs for April 2022

• Manufacturing 47.4 vs. expected 48.0, prior 49.5

• Non-manufacturing 41.9 vs. prior 48.4

China Caixin /Markit Manufacturing PMI for April comes in at 46.0

• vs. expected 47.0, prior 48.1

The intensification of the COVID-19 outbreak and the associated lockdowns and restrictions across many centres in the country, most notably in Shanghai and other economic powerhouse regions, weighed on the economy in the month.

China Caixin Manufacturing PMI below forecasts (47) in April: Actual (46)

223361   April 30, 2022 10:26   FXStreet   Market News  

Feed news

China Non-Manufacturing PMI came in at 41.9 below forecasts (53) in April

223360   April 30, 2022 09:35   FXStreet   Market News  

Feed news

China NBS Manufacturing PMI came in at 47.4 below forecasts (48) in April

223359   April 30, 2022 09:35   FXStreet   Market News  

Feed news

Matic price plummets as bears breach $1.12

223357   April 30, 2022 07:12   FXStreet   Market News  

• Matic price has validated last week’s bearish target.
• Polygon price volume is still low.
• Invalidation of the downtrend scenario is a touch at $1.32 

MATIC has seen better days as the bears have managed to invalidate short-term bullish ideas. Traders should consider MATIC price in a downtrend until further chart evidence is displayed.

MATIC price plummets 

MATIC price is currently trading at $1.12, a bearish target zone mentioned in several previous articles.MATIC price is likely to stay in this zone for a few more days, so being an early buyer is not yet advised. The steep decline accompanied by oversold charting on the Relative Strength Index hints at a countertrend pullback. Still, the risk attached to this scenario is too much to deem this article as a bullish thesis.  

Traders should let early buyers do what they will, and if they can manage to breach $1.32, there could be a potential for a good uptrend scenario to unfold. Currently, the idea for a good countertrend rally is purely a gamble and, if it does occur, a lucky guess. However, it is worth noting that the volume profile is still significantly low during this sell-off, which gives confluence to the ending of the current downslide eventually.

MATIC/USDT 8-Hour Chart

As mentioned above, the invalidation of the downtrend is now a close above $1.32. If the bulls can manage to pull off said price action, Analysts will wait for the chart to display evidence of a countertrend rally which could potentially land in the $1.50 zone resulting in a 35% increase from the current MATIC price 

EUR/USD snaps four days of losses and stays above 1.0500 amidst a risk-off mood

223356   April 30, 2022 06:26   FXStreet   Market News  

• The EUR/USD recorded losses in April of 4.75%, the biggest since 2015.
• Though Wall Street finished with substantial losses, a sudden shift in sentiment failed to boost the greenback vs. the euro.
• US Core PCE down ticked, but headline inflation rose to 6.6%, as the FOMC will hold its May monetary policy meeting

The EUR/USD recovers some ground after being battered in the week, so far down 2.30%, but the hefty monthly losses amount to 4.68%, the most relevant since January 2015. At the time of writing, the EUR/USD is trading at 1.0541.

Sentiment turned sour late in the New York session

The week finished with dismal market sentiment. US equities recorded hefty losses, between 2.77% and 4.17%. China’s coronavirus outbreak which has lasted for the last couple of weeks threatens to disrupt supply chains. The US central bank’s increasing rate hikes to tackle inflation and the Ukraine-Russia conflict, further entering its third month, were the drivers of the last trading day of the month.

Data-wise, the US economic docket featured inflationary readings for March. The Fed’s favorite measure of inflation, the Core Personal Consumer Expenditures (PCE), rose by 5.2% y/y lower than expectations, indicating that inflation excluding volatile items is peaking. The data further strengthens the case for a Federal Reserve rate hike in the next week, as the US central bank chief Jerome Powell expressed during the month that a 50-bps increase is “on the table.”

Analysts at TD Securities expressed that “we now expect the Fed to deliver three consecutive 50bp hikes (in May, June, and July) and subsequently hike rates by 25bp per meeting until they reach a terminal funds rate of 3.25% by March 2023.”

The Eurozone docket featured inflationary figures. France’s inflation rose above expectations and the previous reading, to 4.8% y/y, while French HICP reached 5.4%. Regarding the whole Eurozone, general inflation climbed to 7.5%. Additionally, GDP for Q1 rose to 5%, aligned with estimations.

Next week’s economic docket

In the week ahead, the Eurozone and US dockets would be packed. The Eurozone docket would feature a raft of Retail Sales, PMIs, Industrial Production, and Unemployment rates from Germany, Italy, Spain, France, and the block.

On the US front, the docket would reveal S%P Global PMIs, ISM PMIs, the Federal Reserve monetary policy meeting, ADP Employment Change,  and the Nonfarm Payrolls report.

Key Technical Levels

USD/CAD Weekly Forecast: Is WTI vulnerable?

223355   April 30, 2022 06:26   FXStreet   Market News  

• USD/CAD returns to the top of its eight-month range.
• WTI gains 1.9% to $103.448, range continues to shrink.
• Federal Reserve poised to hike on May 4 matching Bank of Canada.

THE USD/CAD finished on Friday at a three week high of 1.2855, marking the second time this  year the pair has reversed at 1.2500 and subsequently climbed to the top of the range. 

In late mid-January the turn to peak completion took six week (1/20-3/8). This current reversal began on April 4, and at Friday’s close had taken just three weeks. 

Policy equivalence between the Bank of Canada (BoC) and the Federal Reserve has kept the two nations’ bond yields nearly equal. The BoC raised its overnight rate 50 basis points to 1.0% on April 13 and the Fed is universally expected to do the same on May 4.  At the close on Friday the US 10-year Treasury yield was 2.937% and its Canadian counterpart was 2.872%. 

After Russia’s invasion of Ukraine on February 24 drove West Texas Intermediate (WTI) briefly over $125.00, and subsequent volatility helped boost the Canadian dollar to 1.2500 by the end of March. Since then the stalemated conflict and falling prices and volatility in the energy market have returned the advantage to the US dollar and bought the USD/CAD back to the top of its range. 

Canadian economic data was sparse with only February GDP a minor surprise at 1.1% on a 0.8% forecast and January’s 0.2%. 

In the US, Durable Goods Orders in March were better than expected and Initial Jobless Claims remained at near historic lows. The initial shock of -1.4% GDP in the first quarter, far below its 1.1% forecast, had almost no negative market impact. A widening trade deficit and lower inventory restocking by businesses subtracted about 4% from the GDP accounting while consumer spending remained healthy at 2.7%, promising a better performance in the second quarter.  

Personal Consumption Expenditure prices rose to 6.6% in March, slightly more than predicted but core PCE prices were 5.2%, a bit less than forecast. Personal Income and Spending were marginally stronger than anticipated in March and revised upward for February giving credence to the idea that however unhappy consumers say they are in sentiment surveys, they are not about to stop spending. 

USD/CAD outlook

Energy prices remain the differential for USD/CAD. Fed policy, which has given the US dollar such an advantage in other currency pairs, is matched by Tiff Macklem and the bankers of Ottawa. 

The contracting triangle pattern of WTI suggests that a break is imminent. The stalemate in Ukraine and the failure of Russian sanctions to force negotiations and the balancing inability of Europeans to forgo Russian energy suggests that the threat to global energy supplies is fading and that the break in WTI will be lower. If that happens the Canadian dollar will lose its main prop and the USD/CAD will join the rest of the currency market in endorsing the US dollar.  

Canada’s employment report on Friday is mated with the US payroll report. Neither is expected to stray from recent trends or provide market direction. 

In the US, the  Fed meeting on Wednesday will dominate markets. Treasury futures predict the fed funds at 2.75% or higher by the end of the year. How soon that is achieved is undetermined and not known to the Fed governors themselves.  A 0.5% hike next week is assured but whether that continues in June depends on the rate of inflation and the disposition of the US consumer. Thus far Americans have, despite all, continued to show confidence in the future. Domestic consumption has remained strong. 

The Federal Open Market Committee (FOMC) is also expected to start a passive reduction of its $9 trillion balance sheet. If that does not take place, or the governors elect an active role, selling from the bank’s portfolio rather than letting bonds roll-off at maturity, markets will respond by selling or buying theUS dollar.  

The immediate outlook for the USD/CAD remains range bound with knowledge that a breakdown in crude pricing will send the pair higher. 

Canada statistics April 25–April 29

FXStreet

US statistics April 25–April 29

FXStreet

Canada statistics May 2–May 6

FXStreet

US statistics May 2–May 6

FXStreet