With price pressures still running at a subdued level throughout the developed world, hotter-than-expected inflation readings have been hard to come by of late. Perhaps today’s Canadian inflation data marks a turning point for that trend.
Expect more crude oil price volatility as the global oil market can flip from a global supply surplus to a global supply deficit at the drop of a hat. The market is trying to assess whether more sources of oil will get us to the point where daily global oil production is once again ahead of our daily consumption. So far it has not.
While the Federal Reserve has grabbed all the headlines for raising interest rates lately, its neighbor to the north has actually been just as aggressive in tightening policy over the last year. The Bank of Canada has raised its benchmark interest rate three times since the start of last July, and if economists are correct, another hike is likely at Wednesday’s meeting.
Just a few years ago the mantra on crude oil prices was “lower for longer.” Irrational pessimism about the dynamic power of the U.S. economy as well as a misunderstanding about the potential and risks associated with shale oil production substantially impacted investment decisions. We had this doom and gloom attitude that the U.S. days were behind us and our manufacturing in the United States was hopelessly lost forever.
The United States will impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico from midnight Thursday, May 31, ending months of uncertainty over potential exemptions and sharply escalating the risk of a trade war. The announcement by Commerce Secretary Wilbur Ross was sure to cast a long shadow over a meeting of finance ministers from the world's Group of Seven top economies that opens later in the day in Canada.
The U.S. dollar is mixed against major pairs after the U.S. non-farm payrolls (NFP) headline jobs number failed to meet expectations. The United States added 103,000 jobs short of the 193,000 jobs forecast. Wage growth came in as anticipated at 0.3% to keep the pressure on the U.S. Federal Reserve to raise interest rates.
After falling for the past two days, the price of WTI crude oil has bounced back off its lows to trade flat to slightly firmer at the time of this writing on Thursday morning. However, WTI still remains in the red three and half days into the week. As a reminder, oil prices rallied last week and made back a significant chunk of their losses from the week before, but not enough to turn positive on the month. At $61.30 per barrel, WTI thus remains more than $5 or 8% below the high of $66.62 hit on Jan. 25.
As mentioned in my earlier post, trading is likely to wind down ahead of Christmas, but there are a number of currencies which may experience increased levels of volatility from time to time this week.
As trading winds down ahead of Christmas and New Year, volatility in the financial markets are likely to dwindle over the coming week and a half.
The tariff the Trump Administration plans to slap on Canadian lumber imports should lead to a further weakening of the Canadian dollar, a move that precious metals expert Michael Ballanger says can only help the bottom line of Canadian gold producers.