Comments from Donald Trump on currencies and the momentary policy have driven attention away from geopolitical tensions. At a media interview, the US President complained the greenback was too strong and reiterated his support for low interest rates. USD dollar slumped in response. The DXY index plunged to a 2-week low of 100.09 before reversing losses and closing largely flat at 100.78. Treasuries remained firm with yields lower. US 2-year yields slipped -3 points to 1.21% while 10-year yields dropped -4 points to 2.27%. Equities were mixed. Wall Street declined as Trump appeared to be drifting away from his election promises. In the commodity sector, crude oil retreated from recent rally, hinging at the increase in Cushing stockpile last week. EIA's upward revision in the preliminary production estimates in the weekly report also caught attention. The front-month WTI crude oil contract initially extended gains to as high as 53.76 before ending the day at 53.11, down -0.54%. The Brent contract dropped -0.66% for the day.
On oil inventory, the DOE/EIA reported that total crude oil and petroleum products stocks sank -4.71 mmb to 1332.73 mmb in the week ended April 7. Crude oil inventory fell -2.17 mmb to 533.38 mmb with stocks declining in 4 out of 5 PADDs. Cushing stock increased +0.27 mmb to 69.42 mmb while utilization rate gained +0.2% to 91%. For refined oil products, gasoline inventory dropped -2.98 mmb to 236.1 mmb as demand gained +0.32% to 9.28M bpd. Production increased +4.33% to 9.93M bpd while imports plunged -19.6% to 0.49M bpd during the week. Distillate inventory dropped -2.15 mmb to 150.22 mmb as demand jumped +13.1% to 4.64M bpd. Production climbed +1.87% to 5.06M bpd while imports fell -9.92% to 0.12M bpd during the week.
At an interview with WSJ, Trump suggested that the US dollar "is getting too strong, and partially that's my fault because people have confidence in me. But that's hurting – that will hurt ultimately". He added that "it's very, very hard to compete when you have a strong dollar and other countries are devaluing their currency". Yet, Trump refrained from labeling China as currency manipulator, a move derailed from his election promise. On interest rates, Trump affirmed his preference over a low-interest rate policy, noting that "as soon as [rates] go up, your stock market is going to go way down, most likely". During his election campaign, Trump had not reserved his criticism over Fed Chair Janet Yellen and indicated that he would replace her if he's got elected. However, he showed in the interview his "respect" for Yellen and suggested that he has not decided whether he would reappoint her for the second term.
Staying in North America BOC appeared more confident over the economic growth outlook, although it maintained the policy rate unchanged at 0.5% in April. Policymakers upgraded the GDP growth forecast for this year amidst strong housing market activities in the first quarter, but revised lower the figure for 2018. The country's economy is expected to expand +2.6% this year, up from +2.1% in January's projection, before decelerating to +1.9% in 2018 (January: +2.1%) and +1.8% in 2019. BOC now expects the output gap to close in 1Q18. Meanwhile, BOC has revised down the "projection of potential growth, reflecting persistently weak investment". BOC remained cautious, suggesting that "it is too early to conclude that the economy is on a sustainable growth path". The central bank revised the inflation forecast a tick higher to +1.9% and +2% in 2017 and 2018, respectively. Inflation would then further improve to +2.1% in 2019. On the monetary policy, Governor Stephen Poloz described the stance as "decidedly neutral" as the members weighed the improved economic developments against the uncertain trade policy. BOC's policy rate is expected to stay unchanged at 0.5% for the rest of the year.
Today, US PPI probably accelerated to +2.4% y/y in March, from +2.2% a month ago. Core PPI might have improved to +1.8% from +1.5% in February. The preliminary estimate of University of Michigan index is expected to have slipped -0.3 point to 96.6 in April. The weekly initial jobless claims probably increased to 245K in the week ended April 8, from 234K a week ago. The closely-watched inflation report would be released on Friday. Headline CPI probably eased to +2.6% y/y in March, from +2.7% in February. Core CPI might have improved o +2.3% from +2.2% in February. Retails sales might have slipped -0.1% in March, after gaining +0.1% a month ago.