With the North American session coming to a close what is on tap for the session tomorrow?
The day is light on economic data with the ADP nonfarm employment change and the crude oil inventories the only releases.
- The ADP report is expected to come in at 388K versus -301K last month. Recall that sharp decline did not exactly play through to the nonfarm payroll number. Nonfarm payroll in January rose by 467K. Recent data from the ADP and the BLS have been quite different. As a result, whatever comes up from the ADP report released at 8:15 AM tomorrow will likely not lead to much of a overall reaction by the market
- The crude oil inventory data is expected to show a $2.7 million build with gasoline inventories expected to show a $-1.4 million drawdown. The private data will be released at around 4:30 PM ET today
The EVENTS of the day include a Bank of Canada rate decision, OPEC and Fed chair Powell's testimony.
- The Bank of Canada is expected to lift rates by 25 basis points to 0.5%. There may be a possibility that they put off the hike due to the Russian/Ukraine conflict, but that is thought to be unlikely. Not only is the inflationary pressures not getting any better as commodity prices move higher, but the most recent Canada CPI data came in at 5.1% well above their target inflation level (it was also higher than than the 4.8% expected). The 5.1% inflation rate was the highest reading since 1991. Moreover the January MoM increase came in at 0.9% which was the highest reading since January 2017. Inflation remains a problem and the Bank of Canada has a mandate to control inflation which is well above their target level.
Looking at the USDCAD , the pair rebounded higher today after stalling near the low swing area that has confined the pair going back to January 26 between 1.2649 and 1.2656 (there was one brief fall below on Feb 10). The price rise has returned back to the 100 and 200 hour moving averages near 1.2739 and 1.2748.
Recall the USDCAD has been trading mostly in a narrow up and down trading range between 1.2649 and 1.2795. The low price yesterday and today stalled near the lower extreme.
On the topside the 1.2782 to 1.27956 area is a top extreme. Admittedly last week, the price spike above that level breaking to a high of 1.28766. But less than 24 hours later, the price was moved back below that ceiling, and back into the swing area that has seen most of the price action since January 26.
- OPEC is expected to keep the production increases at the 400,000 barrels per day. If there is a surprise it may come with a increase in production but that is highly unlikely even though crude oil prices are currently trading above the $100 level now.
- Fed chair Powell will testify in front of the House financial services committee on Capitol Hill. Needless to say, with the market rates coming off sharply on flight to safety flows, so has the expectations for a potential 50 basis point hike at the March meeting. There are some Fed members who still see a potential hike of that magnitude. However, the hawks would probably be swayed in the favor of the Fed chair. Given Powell's history, it would seem that he would likely look to start raising rates in March, but only by 25 basis points. There is always a chance for a surprise, but with the increase in certainty from Ukraine/Russia, the chances are small. Traders will nevertheless, be hanging on his words. The testimony is expected to begin at 10 AM ET. The text of his prepared remarks may be released later today.