NAFTA negotiations seem to be finally getting traction, but the choice of the U.S. to deal with Mexico first still leaves a lot of question marks regarding how it will affect the Canadian economy.
Fed Chair Jerome Powell's speech at the Jackson Hole Economic Policy Symposium provided no support for the US Dollar as he noted that the gradual pace of rate hikes remains appropriate, leaving market pricing unchanged for the timeline of when the Fed will move next.
Trump's latest attacks, delivered in an interview this week, meant politics cast a shadow over the highly anticipated speech, the highlight of the annual gathering of global central bankers in Jackson Hole, Wyoming, an idyllic setting in the American West for serious discussions on how to manage the economy.
Stocks were up about 0.2% and the USA dollar was sliding a bit. It has also notched up braod gains over the Russian Rouble and Brazilian Real as well as a host of Asian currencies.
But if Powell strikes a message of concern, it could be read as a sign that the Fed is considering slowing its hikes. "This is good news", Powell told his audience.
"The economy is strong", he said. "Inflation is near our 2 percent objective, and most people who want a job are finding one".
The Fed now has raised the federal funds rate by 0.25 of a percentage point seven times since December 2015 after holding the rate at an unprecedented level of near zero for seven years to ease the effects of the recession and the financial crisis.
Powell did not mention Trump by name on Friday, but the Fed chair made it clear that he and his colleagues on the committee that decides interest rates have not changed their minds on what the best course of action is for the USA economy.
However, the Kansas City Fed's annual conference is among the central bank's higher-profile annual events, drawing global media attention and an audience including representatives of other nations' central banks.
The Japanese yen rose 0.1 percent to 111.19 per dollar. He also "made a reference to things going so well, so why bother" raising rates, according to a Wall Street Journal report. "This is good news, and we believe that this good news results in part from the ongoing normalization process, which has moved the stance of policy".
The week began with U.S. President Donald Trump saying he was "not thrilled" with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates. The particular danger for him is that weakness could coincide with the 2020 election campaign, when he would be most vulnerable.
Antoinette Schoar, an economist who teaches at the MIT Sloan School of Management, said the Fed should remain "above the fray".
Friday's price action comes after talks between United States and Chinese trade representatives appeared to end without any breakthrough or success in de-escalating the so called "trade war" between the two. The Dollar index is now up 3% for 2018 after more than reversing a % first-quarter loss.
The yield curve between two-year and 10-year notes has flattened to 19 basis points, from 33 basis points at the beginning of August and 83 basis points in February, as investors price rate hikes into shorter-dated notes.