Retail sales did not miss a beat with sales up 1.4%. Business inventories were up a modest 0.2%. HMMM with sales strong and inventories modestly higher that may a problem when imports slow to a trickle. Maybe it works out and the “weeble starts to wobble but it won’t fall down?”. Or maybe the house of cards gets taller and taller and crashes? It’s too early to tell given all the uncertainties from the Pres. Trump tariff aspirations.
The US dollar moved mostly lower on the day.
The USDJPY fell to the lowest level since September 2024, but stalled at the low of a swing area between 141.64 and 141.94. The price nevertheless remains within that swing area currently at 141.84 keeping the sellers in control, it would take a move back above 142.072 give the buyers a small victory with more work to do.
The BOC Rates kept rates unchanged and Adam pointed out that
The BOC Governor Macklem had a rough time of it in his presser. The central banker offered little in the way of clear policy guidance or a coherent framework for addressing the ongoing trade war. Instead of providing direction, Macklem relied on vague, repetitive talking points—repeating the phrase “navigating carefully” multiple times while referencing his notes. At one point, he stated the Bank was prepared to “act decisively,” only to backtrack and redefine the term as simply meaning flexibility.
That his remarks were more like wishful thinking, particularly in the face of unpredictable U.S. trade policy under Trump. Rather than engaging meaningfully in the debate about whether tariffs are a transitory shock or a longer-term drag on growth and inflation, Macklem largely avoided the topic. He and Deputy Governor Rogers even downplayed the Bank’s own newly-released Monetary Policy Report (MPR) forecasts.
Finally, in a rare moment of candor came when Macklem acknowledged the “erratic, unpredictable course of U.S. trade policy,” a sentiment many market participants likely share. While he reiterated the Bank’s commitment to price stability and supporting the economy within its mandate, that message was buried in a delivery that felt uncertain and meandering. Had he leaned more heavily on that assurance, the press conference may have landed more effectively.
US Fed Chair Powell also spoke today at the Economic Club of Chicago, said the Fed is well positioned to wait for greater clarity before adjusting its policy stance (no hurry to cut). He acknowledged that growth likely slowed in Q1, though the overall economy remains solid amid heightened uncertainty and downside risks. Inflation remains somewhat above the Fed’s 2% target—PCE prices likely rose 2.3% over the past 12 months—but has declined significantly from earlier peaks. Powell highlighted that recent tariffs, which were larger than anticipated, are expected to raise inflation and slow growth. He pointed to a sharp decline in business and consumer sentiment, attributing it to trade policy concerns, while noting the labor market remains strong and broadly balanced.
Powell emphasized that the evolving nature of administrative policies introduces significant uncertainty. He warned that if both inflation and employment goals move off track, the Fed will need to assess how far the economy deviates from its dual mandate and how long those gaps may persist. He sees a strong possibility that trade-related disruptions could push the Fed away from achieving its goals for the remainder of the year. If inflation expectations rise due to delayed tariff effects, the Fed’s challenge would intensify. He remarked that the U.S. hasn’t faced tariffs at this level since the Smoot-Hawley era (and it did not end well either), making it difficult to model the economic impact. Despite these challenges, Powell said markets remain orderly, and the Fed stands ready to provide dollar liquidity to global central banks if necessary. He also downplayed concerns about U.S. government debt, noting that domestic discretionary spending is a small part of the equation.
Generally speaking, the comments from Fed chair Powell did not appease the stock market.
Although Powell’s comments did not help US stocks, they did get off on the wrong foot after Nvidia announced it would take a $5.5 billion charge due to new U.S. export restrictions requiring a license for shipping its H20 AI processors to China and other countries. AMD and Intel also had restrictions as the Trump administration puts the squeeze on China at the expense of Nvidia, AMD, Intel and other chip manufacturers.
Shares of Nvidia fell -.6.87%, AMD fell -7.35%, and Intel fell -3.12%. The NASDAQ index fell by 756 points and the session lows but rally into the close and close down only -516.01 points or -3.07%. The S&P index listing -175.84 points at session lows but closed down -120.3 point -2.24% at the close.
Yields in the US are closing near the lows after being higher earlier. A snsapshot of the closing levels shows:
- 2 year yield 3.775%, -5.12 basis points
- 5-year yield 3.908%, -1.4 basis points
- 10 year yield 4.280%, -4.2 basis points
- 30 year yield 4.742%, -3.4 basis points
In other markets,
- Crude oil is trading up $1.30 or up 2.12%
- Gold surged by $113 or 3.5% to $3342.48. That is the largest one-day gain going back to at least 2013, and maybe on record given it is trading at all-time highs.
- Bitcoin is trading up $657 and $84,343
This article was written by Greg Michalowski at www.forexlive.com.
