The Bank of Canada announced the first interest rate cuts in four years. It comes after the bank started an aggressive policy tightening process in March 2022 that saw it add 475 basis points to interest rates to 5%. 

With today’s decision, the BOC cut rates by 0.25% to 4.75% as expected.

The BOC said in its policy statement that it achieved progress in controlling inflation, with confidence increasing that inflation is heading towards the 2% target. 

The BOC’s decision comes as inflation slowed down from 3.4% in December to 2.7% in April. 

The Energy Information Administration reported a buildup of 1.2 million barrels inn US crude stocks last week to 455.9 million barrels, while analysts expected a drop of 2.1 million barrels. 

Gasoline stocks rose 2.1 million barrels to 230.9 million barrels, while distillate stocks rose 3.2 million barrels to 122.5 million barrels. 

US stock indices rose on Wednesday following the release of important data, while the tech sector rebounded.

Earlier data showed the US private sector added 152 thousand new jobs in May, compared to the addition of 188 thousand new jobs in April, indicating a slowdown in the labor sector, and boosting hopes of Fed rate cuts this year.

The fuller US payrolls report will be released on Friday and will impact the pricing for future Fed rate cuts. 

On trading, Dow Jones rose 0.1% as of 17:37 GMT, or 29 points to 38,740, while S&P 500 rose 0.7%, or 36 points to 5328, as NASDAQ gained 1.3%, or 224 points to 17,081. 

Oil prices rose in European trade on Wednesday for the first time in six sessions, moving away from four-month lows as risk appetite rebounded.

Prices shrugged initial US data that showed an unexpected buildup in crude stocks last week, with official data scheduled for release later today from the EIA.

Prices 

US crude rose 1.4% to $73.85 a barrel, with a session-low at $72.84. 

Brent rose 1% today to $78.09 a barrel, with a session-low at $77.20. 

US crude lost 1.6% on Tuesday, the fifth loss in a row, plumbing a four-month low at $72.43. 

Brent gave up 1.3% yesterday, marking February 5 lows at $76.79. 

Oil prices were engulfed by a wave of losses due to a market glut, especially as OPEC+ prepares to gradually decrease its production cuts starting next October. 

In a surprise move, eight producers led by Saudi Arabia and Russia put a detailed plan to gradually get rid of current production cuts estimated at 2.2 million bpd, starting October 2024. 

Positive Sentiment 

Markets are currently dominated by a wave of strong sentiment as US 10-year treasury yields rebound.

A recent string of weak US data boosted the odds of multiple Fed rate cuts this year.

US Crude Stocks 

Initial data from the American Petroleum Institute showed an inventory buildup of 4.05 million barrels last week, while analysts expected a drop of 1.9 million barrels.

Official data from the EIA will be released today, still expected to show a drop of 2.1 million barrels.