Articles
Dow Jones Industrial Average middles after US PCE inflation meets expectations
399182 June 29, 2024 02:26 FXStreet Market News
- Dow Jones continues to churn near 39,000.00 as markets await signs of rate cuts.
- US PCE Price Index inflation came in as-expected, easing slightly.
- Despite easing key inflation indicators, figures still remain too high for Fed.
The Dow Jones Industrial Average (DJIA) briefly rallied to 39,440.00 early Friday after US Personal Consumption Expenditure Price Index (PCE) inflation figures printed as markets broadly expected. However, risk appetite settled quickly, and equities slumped back to the dayÂ’s opening bids as investors found little has actually changed in the outlook for timing rate cuts from the Federal Reserve (Fed).
Core PCE Price Index inflation ticked down to 2.6% YoY in May, meeting median forecasts and cooling slightly from the previous 2.8%. However, figures still remain well above the FedÂ’s 2% annual inflation target, and the plodding progress in cooling inflation is unlikely to light a fire underneath the US central bank to begin cutting rates sooner rather than later.
According to the CMEÂ’s FedWatch Tool, rate markets are now pricing in 66% odds of at least a quarter-point rate cut from the Federal Open Market Committee (FOMC) on September 18, up slightly from the 60% odds that were priced in before the PCE Price Index inflation print.
US Personal Income rose to 0.5% MoM in May, beating the forecast increase to 0.4% from the previous 0.3%. However, Personal Spending only rose 0.2% versus the forecast 0.3%, and the previous figure saw a slight revision to 0.1% from 0.2%.
The University of Michigan (UoM) Consumer Sentiment Survey rebounded firmly to 68.2, vaulting over the forecast uptick to 65.8 from the previous 65.6. UoM 5-year Consumer Inflation Expectations also ticked lower, down to 3.0% from the previous 3.1%. Despite a slight easing in where consumers expect inflation to be in the next five years, the figure still remains higher than Fed targets.Â
Consumer price growth expectations continue to hold on the high end, plagued by recent memory of “transitory” inflation pressures that lasted for at least six consecutive quarters. Consumers also remain keenly aware that core inflation figures continue to ride at three-decade highs compared to the long-run average.
Dow Jones news
The Dow Jones was roughly on-balance on Friday, with about half of the indexÂ’s constituent securities in the green, though sharp losses in key stocks are dragging the index lower on the day. Salesforce Inc. (CRM) recovered from a jittery bearish pullback heading into the companyÂ’s private shareholder meeting this week. The stock is trading up 2.5% on Friday, testing $260.00 per share.
Nike Inc. (NKE) was battered badly on Friday, facing steep enough losses to drag the Dow Jones lower single-handedly. Nike revealed updated forward guidance on Friday, and the company now expects a 10% decline in revenues in the first quarter of 2025 in a reversal of previous guidance that anticipated steady growth in 2025. NKE is down over 20% on the day, trading into a multi-year low of $75.00 per share.
Dow Jones technical outlook
Despite finding a fresh high for the week on Friday, the Dow Jones continues to trade into median levels just north of the 39,000.00 handle. Intraday price action has been slowly drifting higher through the week. Still, volatility has left the index in a notably wobbly stance, and bullish runs tend to be followed immediately by short side slumps.
The Dow Jones is still trading above technical support from the 50-day Exponential Moving Average (EMA) at 38,895.76, but price action continues to middle on the low side of recent all-time highs set above the 40,000.00 major price handle.
Dow Jones five minute chart
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. DowÂ’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Australian Dollar strengthens further following US PCE figures
399179 June 29, 2024 02:02 FXStreet Market News
- AUD rose against USD due to US inflation reduction and a potential dovish stance from the Fed.
- Soft PCE data from the US may benefit the Aussie policy divergence between the RBA and Fed.
- RBA’s delayed rate cuts could bolster the Aussie, contrasting with other G10 central banks’ reduction strategies.
Friday’s session recorded a significant uplift in the Australian Dollar (AUD) against the US Dollar following an unexpected inflation reduction in the US in May. As a result, expectations of a possibly dovish stance from the Federal Reserve (Fed) grew, leading to a likely divergence in policy with the Reserve Bank of Australia (RBA).
The Australian economy demonstrates minor signs of weakness. However, the heightened inflation rates maintain a stubborn resilience, preventing the RBA from implementing potential rate cuts. The RBA is foreseen delaying rate cuts, making it one of the last G10 country central banks to adopt a reduction policy. These delayed cuts might enhance the further strengthening of the Aussie.
Daily digest market movers: Aussie continues to strengthen amid robust CPI figures
- In terms of the data at hand, the Australian Dollar’s strength was bolstered by increased expectations of the RBA further hiking rates after hot Consumer Price Index (CPI) data reported earlier in the week.
- Market indications are now pricing in approximately 40% odds of a 25-basis-point rate hike from RBA on September 24, extending to 50% leading up to November 5.
- US inflation fell to 2.6% YoY in May from 2.7% in April, according to the US Bureau of Economic Analysis. This decrease matched market expectations.
- On a monthly basis, the Personal Consumption Expenditures (PCE) Price Index remained static. The core PCE Price Index rose by 2.6%, a decrease from the 2.8% escalation that was recorded in April.
- As a result, this downtrend toward the FedÂ’s 2.0% target bumped the probability of a Fed interest rate cut in September to 66%, up from 64% prior to the PCE release, as per the CME FedWatch Tool.
Technical analysis: AUD/USD maintains buyer interest above 20-day SMA
From a technical outlook, the indicators displayed signs of recovery with the Relative Strength Index (RSI) staying above 50, and the Moving Average Convergence Divergence (MACD) printing a fresh green bar. Critical to the future momentum of the pair will be the defense of the 20-day Simple Moving Average (SMA) at 0.6640. As long as buyers manage to sustain above this key level, the future outlook appears promising.
Notably, on Friday, the pair managed to lift back above the 20-day SMA, after dipping to a low of 0.6620, a key indication that buyer defenses remain robust.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is AustraliaÂ’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is AustraliaÂ’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Mexican Peso stages comeback to rally post-Banxico decision
399177 June 29, 2024 01:56 FXStreet Market News
- Mexican Peso rebounds to 18.24 vs. US Dollar following Banxico’s decision to maintain 11.00% rate.
- Decision aligned with recent inflation data, targeting 3% inflation by Q4 2025.
- Inflation risks heightened by service sector, cost pressures, Peso fall and geopolitical tensions.
The Mexican Peso recovered ground against the US Dollar and rallied more than 1% on Friday after the Bank of Mexico (Banxico) decided to keep rates unchanged due to “idiosyncratic factors” and the Peso’s depreciation following the June 2 general election results. The USD/MXN trades at 18.24 after hitting a daily high of 18.59.
Banxico left a lifeline to the battered Peso on Thursday, holding rates at 11.00% after inflation reaccelerated, according to JuneÂ’s mid-month inflation data.
The Mexican institution expects headline inflation to converge to the bankÂ’s 3% target by Q4 2025 and acknowledged that inflation risks are skewed to the upside due to high services inflation, cost pressures, Mexican Peso depreciation and geopolitical conflicts.
Across the border, the US Federal ReserveÂ’s (Fed) preferred inflation gauge came as expected by the consensus, showing an improvement in headline and core Personal Consumption Expenditures (PCE) Price Index.
The data failed to underpin the Greenback, which remains pressured, losing some 0.16% as revealed by the US Dollar Index (DXY). Therefore, the USD/MXN might continue on the back foot toward the remainder of the day as sellers eye an April 19 high of 18.15.
Daily digest market movers: Mexican Peso strengthens after Banxico hold
- BanxicoÂ’s decision was not unanimous and was perceived as dovish as Deputy Governor Omar Mejia Castelazo opted for a quarter of a percentage rate cut.
- Mexico’s central bank monetary policy statement highlighted the Governing Board expects the disinflation process to evolve and added that “Looking ahead, the board foresees that the inflationary environment may allow for discussing reference-rate adjustments.”
- A Citibanamex survey showed economists priced out fewer rate cuts by the central bank. They also revised the Gross Domestic Product (GDP) for 2024 downward from 2.2% to 2.1% YoY and expect the USD/MXN exchange rate to finish the year at 18.70, up from 18.00 previously reported.
- US PCE was lower than AprilÂ’s 0.3% and was 0% MoM as expected. Core PCE expanded by 0.1% MoM as estimated, which is also beneath the previous reading of 0.3%.
- US Consumer Sentiment final reading for June of 68.2 deteriorated compared to MayÂ’s 69.1, yet improved as the preliminary reading was 65.8. Inflation expectations remained steady in the short and long periods at 3%.
- CME FedWatch Tool shows odds for a 25-basis-point Fed rate cut at 59.5%, unchanged from the previous day.
Technical analysis: Mexican Peso climbs as USD/MXN tumbles below 18.30
The USD/MXN is undergoing a pullback after hitting a daily high of 18.59 earlier in the day, opening the door to challenging key support levels. From a momentum standpoint, sellers are gathering some steam. This is depicted by the Relative Strength Index (RSI) pointing downward though still remaining bullish, suggesting the pullback could be short-lived.
For a bearish continuation, sellers need to reclaim the April 19 high turned support at 18.15, which would pave the way toward 18.00. The next support would be the 50-day Simple Moving Average (SMA) at 17.37 before testing the 200-day SMA at 17.23.
On the other hand, if buyers achieve a decisive break above the psychological 18.50 level, the next stop would be the year-to-date (YTD) high of 18.99, followed by the March 20, 2023, high of 19.23.
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of MexicoÂ’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Dallas Fed May PCE price index +1.4% m/m annualized vs +2.7% prior
399176 June 29, 2024 01:40 Forexlive Latest News Market News
The Dallas and Cleveland PCE remix data illustrates why Fed officials and markets are feeling better about the pricing picture.
- One month annualized trimmed mean 1.4% vs 2.7% prior (lowest this year)
- Six month annualized 3.0% vs 3.1% prior
- 12-month 2.8% vs 2.9% prior
Digging through the numbers, some drivers of inflation:
- Prescription drugs
- Tobacco
- Spectator sports
- Hospitals
- Used trucks
Some drivers of disinflation:
- Computer software and accessories
- Gasoline
- Air transport
- Financial services fees
- Women’s and girls clothing
One thing that wasn’t trimmed out was rent, which was up 4.8% annualized and still remains a problematic part of the inflation picture.
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Exepct the first tropical storm of the Atlantic season on the weekend
399175 June 29, 2024 01:34 Forexlive Latest News Market News
The US National Hurricane Center now sees a 100% chance of a tropical depression forming in the next 48 horus in the central Atlantic.
Three storms are in the mix with one expect to cross the Yucatan peninsula on the weekend. The others should head in a westerly direction, aimed just south of Haiti, which may put them right in hurricane alley.
It’s still very early but those could be stories next week.
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Fetch.ai price to extend decline after testing major resistance level
399171 June 29, 2024 01:33 FXStreet Market News
- Fetch.ai faces resistance at $1.65, the 61.8% Fibonacci retracement level in the weekly chart, and trades below $1.46 on Friday.
- On-chain data shows FETÂ’s investors are booking profits, and supply on exchanges is increasing, signaling a bearish momentum.
- A weekly candlestick close above $1.65 would invalidate the bearish thesis.
Fetch.ai (FET) price is encountering resistance at $1.65 this week, with current trading below $1.46 as of Friday. On-chain data reveals that FETÂ’s investors are taking profits, leading to an uptick in supply on exchanges. This indicates a bearish momentum that could potentially drive down FET’s price in the coming days.
Fetch.ai price set for a downward move
Fetch.ai price faces resistance at $1.65, the 61.8% Fibonacci retracement level from the weekly swing low of $0.51 on February 5 to the weekly swing high of $3.48 on March 25. At the time of writing, FET trades at $1.46 on Friday.
If this support level cannot hold and FET closes below the 200-week Exponential Moving Average (EMA) around the $1.30 level, it could crash 30% to retest its next weekly support level at $0.89.
The momentum indicators support this bearish scenario. The Relative Strength Index (RSI) on the weekly chart has briefly slipped below the 50 mean level, while the Awesome Oscillator (AO) is on its way to doing the same. These momentum indicators strongly indicate bearish dominance.
FET/USDT weekly chart
SantimentÂ’s Age Consumed index aligns with the bearish outlook noted from a technical perspective. The spikes in this index suggest dormant tokens (tokens stored in wallets for a long time) are in motion and can be used to spot short-term local tops or bottoms.
For FETs, history shows that the spikes were followed by a decline in the Fetch.ai price. The most recent uptick on June 27 also forecasted that FET is ready for a downtrend.
FET Age Consumed chart
On-chain data provider SantimentÂ’s Network Realized Profit/Loss (NPL) indicator computes a daily network-level Return On Investment (ROI) based on the coinÂ’s on-chain transaction volume. Simply put, it is used to measure market pain. Strong spikes in a coinÂ’s NPL indicate that its holders are, on average, selling their bags at a significant profit. On the other hand, strong dips imply that the coinÂ’s holders are, on average, realizing losses, suggesting panic sell-offs and investor capitulation.Â
In FETÂ’s case, the NPL indicator spiked 1.06 million to 34.41 million on June 26 and 27, coinciding with an 11% price rise. This upward spike indicates that the holders were, on average, selling their bags at a significant profit.
During this event, the FETÂ’s supply on exchanges rose from 145.49 million to 173.01 million in two days. This increase in supply indicates that investors are moving FET tokens to exchanges and increasing selling activity, signaling a bearish outlook.
FET Network Realized Profit/Loss and Supply on Exchanges chart
Even though the on-chain metric and technical analysis point to a bearish outlook, a FETÂ’s weekly candlestick close above $1.65 would invalidate the bearish thesis by producing a higher high on the weekly timeframe. This development could see Fetch.aiÂ’s price rally 31% to the next weekly resistance level of $2.16.
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This year the S&P 500 has had 32 all-time highs. Why that matters
399169 June 29, 2024 01:06 Forexlive Latest News Market News
The S&P 500 touched a fresh all-time high today at 5523 (and counting). That marks the 32nd day with the index hitting a record high in the first half of the year.
Today, Deutsche Bank compares the number of ATHs this year compared to historical norms. In short, it’s been one of the best years ever, with the sixth-highest number of all-time highs since 1928.
“In the top
10, the average number of ATHs in H1 has been 33. For the rest of the year this
cohort saw an average of 19 further ATHs in H2 with an average H2 price move of
+5% and a median of +10%. The only two in the top ten of H1 ATHs that saw a
negative H2 price move was 1987 (-19%) and 1983 (-2%). 1983 was the only one in
the top 10 that saw less than 10 ATHs in H2. It only saw one further ATH that
year. 1987 saw 14 further H2 ATHs before the crash that October.”
United States Baker Hughes US Oil Rig Count dipped from previous 485Â to 479
399168 June 29, 2024 01:05 FXStreet Market News
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Canadian Dollar gains ground after Canadian GDP steps higher
399165 June 29, 2024 00:46 FXStreet Market News
- Canadian Dollar bolstered by rising market sentiment.
- Canada posted a 0.3% uptick in GDP, propping up CAD.
- US PCE inflation also ticked lower, further bolstering rate cut hopes.
The Canadian Dollar (CAD) found some room on the high side on Friday, pushing up by a scant tenth of a percent against the US Dollar amid choppy intraday price action after key economic data broadly met market expectations. Canadian Gross Domestic Product (GDP) ticked higher and US Personal Consumption Expenditure Price Index (PCE) inflation figures cooled slightly.
Canada posted a slight gain in GDP growth in April, rebounding from the previous monthÂ’s flat print. A stacked US data docket also generally met market expectations, though US Personal Spending failed to meet expectations despite a post-revision improvement.
Daily digest market movers: Canadian GDP rebounds, US inflation continues to ease for now
- Canadian MoM GDP posted a 0.3% increase in April, meeting market expectations and recovering from the previous monthÂ’s 0.0%.
- US PCE Price Index inflation also eased to 2.6% YoY in May, meeting market forecasts and cooling from the previous 2.8%.
- Market bets of a September rate cut from the Federal Reserve (Fed) have ticked higher post-PCE. According to the CMEÂ’s FedWatch Tool, rate markets are pricing in 66% odds of at least a quarter-point rate trim from the Fed on September 18, up from a flat 60% pre-PCE inflation.
- University of Michigan (UoM) 5-year Consumer Inflation Expectations also ticked down to 3.0% in June, down from previous 3.1%.
- UoM Consumer Sentiment Index for June also surged to 68.2 from 65.6, vaulting over median market forecasts of 65.8.
Canadian Dollar PRICE Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.
| Â | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | Â | -0.15% | -0.02% | 0.03% | -0.14% | -0.41% | -0.20% | -0.01% |
| EUR | 0.15% | Â | 0.12% | 0.17% | 0.00% | -0.27% | -0.06% | 0.13% |
| GBP | 0.02% | -0.12% | Â | 0.02% | -0.13% | -0.39% | -0.18% | -0.02% |
| JPY | -0.03% | -0.17% | -0.02% | Â | -0.19% | -0.44% | -0.24% | -0.05% |
| CAD | 0.14% | -0.01% | 0.13% | 0.19% | Â | -0.28% | -0.06% | 0.10% |
| AUD | 0.41% | 0.27% | 0.39% | 0.44% | 0.28% | Â | 0.21% | 0.38% |
| NZD | 0.20% | 0.06% | 0.18% | 0.24% | 0.06% | -0.21% | Â | 0.16% |
| CHF | 0.01% | -0.13% | 0.02% | 0.05% | -0.10% | -0.38% | -0.16% | Â |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Technical analysis: Canadian Dollar recovers ground on Friday, sends USD/CAD into familiar levels
The Canadian Dollar found a bid on Friday, gaining ground against the majority of its major currency peers as markets get set to wrap up a relatively sedate trading week. The CAD gained around one-tenth of one percent against the US Dollar on Friday and climbed nearly one-quarter of one percent against the broadly-battered Japanese Yen.
USD/CAD briefly found a fresh high for the week near 1.3735 early Friday before settling back into familiar near-term lows near 1.3675. CAD strength has briefly halted a recent upswing in the pair on a Greenback bid, sending USD/CAD into a rough near-term corkscrew around the 200-hour Exponential Moving Average (EMA) near the 1.3700 handle.
USD/CAD hourly chart
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is CanadaÂ’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in CanadaÂ’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
Forecasting the Coming Week: Data, politics and the ECB Forum take centre stage
399164 June 29, 2024 00:45 FXStreet Market News
In quite an uneventful week, the Greenback and the risk-linked assets kept their recent ranges barely changed. Moving forward, the US Dollar should remain under scrutiny in light of the participation of Chief Powell at the ECB Forum and the release of the US NFP on July 5. In addition, investors should closely follow the annual meeting of the ECB in Portugal, while politics will also be in the spotlight following the French snap elections on June 30 and the UK General Elections on July 4.
The Greenback ended the week in the middle of the range after the earlier move to tops past the 106.00 hurdle lacked follow-through. The final S&P Global Manufacturing PMI comes on July 1, along with the ISM Manufacturing PMI and Construction Spending. On July 2, Chair Powell speaks at the ECB Forum, while the RCM/TIPP Economic Optimism Index is due. A very busy calendar on July 3 includes MBAÂ’s Mortgage Applications, the ADP Employment Change, Initial Jobless Claims, Balance of Trade figures, Factory Orders, the final S&P Global Services PMI, the ISM Services PMI, and the publication of the FOMC Minutes. US markets will be closed on July 4 due to the Independence Day holiday. Finally, Nonfarm Payrolls and the Unemployment Rate will close the docket on July 5.
EUR/USD managed to close its first week of gains after three consecutive pullbacks, reclaiming the area beyond the 1.0700 barrier. The ECB Forum in Sintra (Portugal) kicks in on July 1; in addition, the final HCOB Manufacturing PMI is due in Germany and the broader Euroland ahead of the preliminary Inflation Rate in Germany. On July 2, the advanced Inflation Rate in the euro area is expected, along with the Unemployment Rate in the whole bloc. The final HCOB Services PMI is due in Germany and the euro bloc on July 3, while Retail Sales in the euro zone will be unveiled on July 5.
A small recovery allowed GBP/USD to reverse part of the recent weakness and set aside three weeks in a row in negative territory. The Nationwide Housing Prices come on July 1, seconded by the final S&P Global Manufacturing PMI, Mortgage Approvals and Mortgage Lending. In addition, the final S&P Global Services PMI is due on July 3. On July 4, comes the UK General Election.
USD/JPY closed its third straight week of gains, reaching fresh multi-decade tops north of the 161.00 mark. The Consumer Confidence gauge opens the Japanese docket on July 1, followed by the Tankan survey on July 3. The usual weekly Foreign Bond Investment figures will be released on July 4, while Household Spending, and the advanced Coincident Index and Leading Economic Index come on July 5.
Despite trading within a consolidative range, AUD/USD advanced for the third week in a row, although a test or surpass of the 0.6700 hurdle remained elusive. The final Judo Bank Manufacturing PMI will be released on July 1, ahead of the RBA Minutes on July 2. On July 3, the Ai Group Industry Index will be followed by preliminary Building Permits and Retail Sales. The Balance of Trade results will close the calendar in Oz on July 4.
Anticipating Economic Perspectives: Voices on the Horizon
- The ECBÂ’s Nagel and Lagarde are expected to speak on July 1.
- The FedÂ’s Powell and ECBÂ’s Lagarde speak at the ECB Forum in Portugal on July 2.
- The FedÂ’s Williams speaks on July 3 along with the ECBÂ’s Lagarde.
- The ECBÂ’s Nagel and Lagarde will speak on July 5, followed by the FedÂ’s Williams.
Central Banks: Upcoming Meetings to Shape Monetary Policies
- The National Bank of Poland (NBP) meets on July 3.
US oil production rose 72K bpd in April
399163 June 29, 2024 00:41 Forexlive Latest News Market News
The EIA is out with its month report today, which is much more accurate than the weekly data. This is for April and it showed a 72,000 barrel per day increase to 13.248 million barrels per day, which is the highest since December.
There has clearly been a stall in momentum since this time last year and there is no sign of a big pickup.
On the demand side, product supplied rose 131k bpd in April to 20.0m bpd. That’s not great as it’s down 0.1% y/y, largely on gasoline.
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