For the first time in many months, the Bank of Canada leaves its interest rate unchanged, and confidently predicts inflation will fall further to 3% by mid-2023.
- At its monthly policy meeting yesterday, the Bank of Canada left its interest rate at 4.5% and stated that it expects inflation to continue to fall, as it has been doing for some months, to reach a level as low as 3% within just a few months. Following the meeting, the Canadian Dollar is trading lower, and is continuing to weaken.
- Fed Chair Jerome Powell testified before the US House of Representatives yesterday about the Federal Reserve’s monetary policy. He was a little less hawkish than he had been the previous day in front of the Senate. However, the US Dollar and yields remained strong, at least for a few hours in the case of the Dollar. The US 2-Year Treasury Yield made a new 15-year high at 5.085%.
- The US Yield Curve is inverted by more than 1% for the first time since 1981, when it was seen as a sign of a strong recession. The 10-Year Treasury Yield is more than 1% below the 2-Year Treasury Yield, leading more economists to expect the US economy will soon tip into a recession. However, this is belied by stronger than expected JOLTS job data and the ADP non-farm employment change forecast, which is suggestive of a still-robust US economy.
- In the Forex market, the Japanese Yen is the strongest major currency, while the Canadian Dollar is the weakest. This puts the CAD/JPY currency cross in focus today.
- The Fed’s hawkish expressions are pushing up US Treasury Yields, with the 2-Year trading at a new 15-year high above 5% and looking likely to rise higher still over coming days. This may bring an opportunity to trend traders who can access this asset, whether through a CFD or through the relevant micro future. \
- Some commodities are performing very well, with a few continuing to rise after having recently made significant bullish breakouts, notably Sugar and Cocoa.
- There are no high-impact data releases scheduled today, so markets are likely to be relatively calm.