The Weekly Bottom Line: Canada – Jobs Surge Delays Rate Cut Bets

This week’s economic update is centered on the jobs report released earlier today. April saw an unexpectedly large gain of 90k jobs, but since the labour force expanded by an equally substantial amount, the unemployment rate held steady. Wage growth slowed relative to March but was slightly above the consensus estimate. The Canadian dollar saw an uptick on the news as markets pared back bets on the extent of rate cuts this year.

Forex and Cryptocurrency Forecast

Throughout the past week, EUR/USD exhibited mixed dynamics, primarily driven by expectations concerning potential interest rate cuts by the US Federal Reserve (Fed) and the European Central Bank (ECB). Statements by officials from both central banks, as well as economic macro-statistics, either heightened or lowered these expectations.

Morning Report

A sharp fall US consumer confidence added to evidence that the US economy is losing some momentum. However, an uptick in consumer inflation expectations complicated the picture, prompting suggestions of the risk of stagflation. A flurry of Fed speakers reinforced higher for longer messaging but backed up Jerome Powell in watering down the risk of further rate hikes.

NZ First Impressions: RBNZ Survey of Expectations, Q2 2024

Inflation expectations have continued to fall. That will help to quell the RBNZ concerns about the longer-term inflation outlook.

EV Trade Spat Flares Up Amid US Tariff Hike

On the political front, the Biden administration intends to increase tariffs on Chinese vehicle imports from 25% to 100%. The initiative is part of an effort to safeguard American industry ahead of the US election and is expected to be announced tomorrow.

Unideal Inflation Dynamics Explain Why Fed Won't be in a Position to Cut Rates Soon

So it’s in this tense and uncertain conditions that the US inflation data will land this week. A consensus of analyst estimates on Bloomberg survey points at a small improvement in both headline and core measures.

Could Wednesday's CPI Report Change Fed's Rate Outlook?

The aggressive deceleration in US inflation seen during 2022 has paused over the past few months with CPI proving stickier than widely expected. As a result, the market is now expecting just 42bps of monetary policy easing by the Fed during 2024 with the CPI dataset continuing to have a significant market impact.

Crypto Market Under Pressure from Bitcoin

Crypto market cap on Monday stands at $2.2 trillion, down 5.2% over seven days, although it showed some growth over the weekend. Local market capitalisation peaked on March 14th, but the active decline began about a month ago, with a sequence of lower lows and lower highs.

NZ Dollar Edges Lower as Inflation Expectations Fall

New Zealand’s inflation expectations fell to 2.3% in the second quarter, its lowest point since Q3 2021. This marked a third straight deceleration and the New Zealand dollar responded with modest losses. The steady drop in inflation expectations is an encouraging sign for the Reserve Bank of New Zealand but won’t translate into a rate cut in the near-term.

GBP/USD Higher With Eye on Employment Report

The British pound is slightly higher on Monday. GBP/USD is up 0.20%, trading at 1.2549 in the European session at the time of writing.