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Just when it seemed like a regular grind for the markets, another round of hawkish remarks from Powell plus Trump’s announcement on imposing steel tariffs spurred a sharp selloff.

  • Canadian current account deficit narrowed from 18.6B CAD to 16.3B CAD
  • U.S. core PCE price index ticked up from 0.2% to 0.3%
  • U.S. personal spending up by 0.2% as expected, 0.4% previous
  • U.S. personal income up by another 0.4% vs. 0.3% forecast
  • U.S. initial jobless claims down from 220K to 210K vs. 226K estimate
  • Canadian Markit manufacturing PMI dipped from 55.9 to 55.6
  • Fed head Powell: No evidence the U.S. economy is overheating
  • Powell: Gradual rate hikes still the best course of action
  • U.S. President Trump to impose 25% tariff on steel and 10% on aluminum
  • U.S. ISM manufacturing PMI up from 59.1 to 60.8

Major Events/Reports:

Mixed data from Canada

First off, the current account balance in Q4 2017 came in better than expected as the deficit narrowed from 18.6 billion CAD to 16.3 billion CAD versus the estimate of a 17.8 billion CAD shortfall.

Components of the report revealed that this was mainly due to a lower goods deficit, capping off three consecutive quarterly increases. Canada’s surplus with the U.S. was up $2.6 billion to $10.5 billion as total goods exports were up $6.4 billion to $137.7 billion during the period.

However, the Loonie shrugged off the upbeat report as this was already old news. Instead, it had a stronger reaction to the February Markit PMI, which dipped from 55.9 to 55.6 to show a weaker pace of expansion.

Underlying data showed that output, new orders, and input buying increased while capacity pressures led to a buildup in backlogs. Apart from that, new U.S. trucking regulations also worsened these capacity issues among some firms.

Risk aversion extends its stay

Higher-yielders were already on the back foot in the previous trading session, but the selloff worsened when Fed head Powell reiterated his hawkish stance.

While he repeated most of his remarks from his earlier speech in his second testimony on Capitol Hill to the Senate Finance Committee, Powell tried to temper market expectations for a Fed hike by citing that he would still like to see more wage increases and that more strengthening in the jobs market could result to this.

He also mentioned that gradual tightening would be the best course of action as there is no evidence that the U.S. economy is overheating. However, global tightening fears picked up when he later on clarified that “gradual” could mean four rate hikes. Say what?!

It didn’t help that U.S. President Trump made a surprise announcement of his plans to impose tariffs on imported steel and aluminum to protect U.S. producers, stoking fears of a trade war once more. U.S. equities closed in the red:

  • Dow 30 index is down 420.22 points to 24,608.98 (-1.68%)
  • S&P 500 index is down 36.16 points to 2,677.67 (-1.33%)
  • Nasdaq is down 92.45 points to 7,180.56 (-1.27%)

Commodities also extended their slide from the earlier session while U.S. bond yields took heavy hits.

Major Market Mover(s):


Even though risk aversion came back in full swing after Powell’s and Trump’s speeches, the dollar wasn’t immune from the bloodbath as a potential trade war could have major repercussions on U.S. growth.

USD/JPY tumbled below the 106.50 mark to a low of 106.11, EUR/USD popped up to 1.2275, USD/CHF retreated from a high of .9491 to the .9415 area, and GBP/USD bounced off a low of 1.3711 to 1.3781.


The Loonie was the weakest of the comdoll bunch as NAFTA talks are still in limbo and a trade war with the U.S. could severely hurt its export sector.

USD/CAD spiked to a high of 1.2895, CAD/JPY continued to slump to a low of 82.50, EUR/CAD is up to 1.5740, and AUD/CAD rallied back to .9962.

Watch Out For:

  • 11:30 pm GMT: Tokyo core CPI y/y (gain from 0.7% to 0.8% expected)
  • 11:30 pm GMT: Japanese unemployment rate (no change from 2.8% expected)