Canada's CPI and BOC Macklem in focus

Positive China GDP leads market sentiment

By Nadia Elbilassy | @Nadia Elbilassy | 18 April 2023

Midday Market update
  • IEA warns of recession after OPEC+ production cuts

  • China’s GDP grows 4.5% from 2.9% previous

  • The dollar resumes strength weighing on other major currencies

Oil falls over supply concerns

Oil prices decline over 2%, as markets price in the next policy meeting by the Fed. Although WTI trades today on a good note backed up by the second largest oil importer in the world after positive Chinese economic data of their GDP growing more than expected in the first quarter of the year, rising 4.5%, compared to the previous reading of 2.9%. On a quarterly basis, the GDP of the second-largest economy in the world grew by 2.2%.

On another note, The International Energy Agency has issued a warning in its monthly report that the production cuts announced by the "OPEC +" organization could exacerbate the expected oil supply shortage in the second half of this year, which in turn could threaten global economic growth and increase fears of a recession.

The report also notes that oil demand among members of the Organization for Economic Cooperation and Development fell by approximately 390,000 barrels per day on an annual basis during the first quarter due to weak industrial activity.

Yen falls under pressure from strong US dollar

Continuing the rise of the US dollar against most major currencies, as markets awaited corporate earnings results, the dollar saw a slight increase in the second session of the week against its Japanese counterpart, trading near 134.42.

Thomas Barkin, a member of the Federal Reserve, stated on Monday that the bank needs to see more evidence of declining inflation rates before making any decisions to ease or tighten monetary policy. Currently, investors are focused on the release of corporate earnings results for the first quarter of the year, which usually starts with the results of Wall Street-listed banks.

Bank of Japan officials, including its new governor Kazuo Oida, continued to make statements regarding the bank's ongoing easing policy to support the economy and maintain the bond yield curve control program, while waiting to see the impact of significant wage increases on inflation rates, which has given the dollar more strength against the Japanese yen.

Canadian dollar stabilizes, awaiting inflation data

The USD/CAD rose near 1.3371 in the second session of the week, after breaking the 1.35 psychological level. As markets anticipate key inflation figures in Canada today and a speech from the Governor of the Bank of Canada later tonight.

In its recent meeting, the Bank of Canada decided to maintain interest rates at 4.50% for the second time in a row. Tiff Macklem, the Governor of the Bank of Canada, expressed concern about inflation persisting above the target level and its potential impact on inflation risks. He also emphasized that the bank is ready to raise interest rates if necessary to bring inflation back to the targeted levels.