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Market Wire, North America

Fed Worried About Cutting Too Soon

At their late January meeting, Federal Reserve officials saw the potential negative consequences of cutting rates too soon as outweighing the risk of waiting too long – a balance of opinion that should help ratify market expectations for a hold at the March decision. According to a record of the January 30-31 Federal Open Market Committee meeting, “most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving sustainably down to 2 percent”. Officials noted a series of risks to the...

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Canadian Inflation Decelerates Sharply in January

Canadian headline inflation decelerated significantly faster than expected in January, and the underlying price indicators followed most closely by the Bank of Canada softened substantially – helping raise odds on an imminent pivot toward easier monetary policy. Data released by Statistics Canada this morning showed the Consumer Price Index rising 2.9 percent on a year-over-year basis in January, down from the 3.4 percent increase recorded in December, and far beneath consensus expectations set closer to 3.3 percent. On a month-over-month basis, prices held effectively unchanged – also well below market forecasts for a 0.4 percent gain. Shelter costs provided the...

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US Inflation Revisions Are Damp Squib, Canadian Jobs Beat

Revisions to seasonal adjustments used in the US consumer price index helped push bond yields lower and boost equity prices this morning. The annualized change in headline inflation over the last six months of 2024 was reduced by 0.2 percent, while core price growth remained unchanged. This combination should leave monetary policymakers unmoved, but will also alleviate hedging requirements among market participants who had feared a repeat of early-2023’s revisions.  All-items consumer price index, monthly % change The Canadian economy generated more jobs than anticipated in January, but wage growth slowed sharply, helping firm market expectations for an imminent pivot...

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Payrolls Crush Expectations, Slashing Odds on March Rate Cut

The US economy generated far stronger wage growth and more jobs than expected in January, driving yields and the dollar higher, while almost certainly taking a March rate cut off the table. According to data released by the Bureau of Labor Statistics this morning, 353,000 jobs were added, and the unemployment rate held steady at 3.7 percent, remaining near historic lows. Average hourly earnings rose 0.6 percent month-over-month, up 4.5 percent year-over-year, solidly topping expectations for a 4.1 percent increase. Ahead of the release, consensus estimates had pointed to a 185,000-job gain, and the unemployment rate was seen moving up...

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Fed Shifts Into Neutral

For a fourth consecutive meeting, the US Federal Reserve’s policy committee held benchmark borrowing costs at a 23-year high, and signalled a desire to keep rates at prevailing levels for now. In a distinctly non-committal statement, the Federal Open Market Committee said it “judges that the risks to achieving its employment and inflation goals are moving into better balance,” but avoided telegraphing imminent cuts, warning that it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent”. Language that previously referred to the possibility...

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