Canada Says G7 Finance Ministers To Focus On Restoring Stability, Growth

Key Points:

Loretta Mester and Mary Daly from the Federal Reserve indicated a wait-and-see approach at an Atlanta Fed Bank meeting given current economic uncertainties.

The Federal Reserve's cautious stance accentuates market volatility, especially impacting cryptocurrencies like Bitcoin. Ether and altcoins reflect similar risk-off behaviors.

Fed's Caution Sparks Cryptocurrency Market Turbulence

Federal Reserve Bank Presidents Loretta Mester and Mary Daly emphasized a cautious approach during a meeting in Atlanta, citing uncertainty in trade policy. Such vagueness limits precise monetary policy action. Monetary policy remains uncertain given the unpredictable fiscal backdrop, leading to elevated market volatility. Bitcoin and Ethereum showed caution-driven responses, with Bitcoin's price reacting sharply to recent announcements. The cryptocurrency market's reactions have demonstrated increased sensitivity, reflecting broader economic apprehensions.

Given the uncertainty surrounding the impact of the Trump administration's policies, the best course of action for the Fed now is to wait and then make any further policy decisions.

Historical Fluctuations: Bitcoin Reacts to Fed Policies

Did you know? In periods of Federal Reserve indecision, BTC and major altcoins display sharp market fluctuations—a trend seen during trade policy shifts and Fed reviews in 2020 and 2023.

Bitcoin's current valuation stands at $106,790.79, with a market cap of $2.12 trillion and 24-hour trading volume dropping by 38.46%, according to CoinMarketCap. Bitcoin's dominant market position of 62.95% continues to impact broader sentiment.

Bitcoin(BTC), daily chart, screenshot on CoinMarketCap at 00:22 UTC on May 21, 2025. Source: CoinMarketCap

Coincu research indicates that Federal Reserve policy ambiguity often precipitates cryptocurrency volatility. Historical patterns suggest increased market activity aligns with shifting monetary signals.

Source: CryptoSlate

The Canadian dollar strengthened against its U.S. counterpart on Tuesday as investors slashed bets on a Bank of Canada interest rate cut next month after domestic data showed underlying inflation heating up.

The loonie was trading 0.2% higher at 1.3925 per U.S. dollar, or 71.81 U.S. cents, after moving in a range of 1.3918 to 1.3968.Canada's annual inflation rate fell to 1.7% in April due to a drop in energy prices but two core measures closely watched by the BoC moved above 3%."Ex-food and energy was probably a little bit hotter than expected," said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. "I think it would give the Bank of Canada a chance to pause even further."

The Canadian overnight index swaps market was pricing in a 33% chance of an interest rate cut at the next BoC policy decision on June 4, down from 65% before the data. The central bank left its benchmark rate on hold at 2.75% last month, the first pause since the easing campaign began last June.

The U.S. dollar (.DXY), fell against a basket of major currencies, weighed down in part by the Federal Reserve's caution over the economy, while the price of oil , one of Canada's major exports, settled 0.2% lower at $62.56 a barrel.

Canadian government bond yields rose across the curve. The 10-year was up 11.6 basis points at 3.290%, after earlier touching its highest level since January 24 at 3.319%.

Reporting by Fergal Smith in Toronto; Editing by Nia Williams

Source: Kitco

Israel is preparing for a potential military strike on Iranian nuclear facilities, as the U.S. continues to pursue a diplomatic agreement with Tehran, CNN reported on Tuesday, citing multiple U.S. officials familiar with recent intelligence.

While Israeli leaders have not made a final decision, intercepted communications and observed military movements, including air munitions transfers and completed air drills, have heightened U.S. concerns, CNN said.

One source told CNN that the likelihood of an Israeli strike has "gone up significantly" in recent months. The person added that a US-Iran nuclear deal under President Donald Trump that doesn’t eliminate all Iranian uranium makes a strike more likely.

Any strike would represent a significant break with Trump, who has prioritized diplomacy but warned of possible military action should nuclear talks fail, the CNN report said.

Trump reportedly gave Iran’s Supreme Leader a 60-day deadline in March to reach a deal. That deadline has passed.

A strike could also inflame tensions in a region already destabilized by the war in Gaza. The CNN report stated that despite the risks, Israeli leaders appear willing to act if Washington pursues a deal they view as inadequate.

Israel lacks the capacity to destroy Iran’s nuclear program without U.S. military support, but could act alone to derail a prospective agreement, CNN reported.

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Federal Reserve officials said on Tuesday that higher prices are coming on the back of rising U.S. import tariffs, with the open question now whether the inflation shock will be fleeting or more persistent.

"One thing that we've heard is that a lot of the tariff impact to date has actually not shown up in the numbers yet. There's been a lot of front-running, building inventories and all those sorts of things. And we are hearing from an increasing number of businesses that those strategies ... are starting to run their course," Atlanta Fed President Raphael Bostic said on the sidelines of a conference in Florida."If these pre-tariff strategies have run their course, we're about to see some changes in prices, and then we're going to learn how consumers are going to respond to that," said Bostic, who now expects the U.S. central bank will have to wait longer to have clarity about the economy's direction and make any changes to interest rates.

"We should wait and see where the economy is going before we do anything definitive," said Bostic, who now anticipates only a single quarter-percentage-point cut in the Fed's policy rate this year and several months on the sidelines waiting for the effect of Trump administration policies to become clear.

So far the main impact appears to be in sentiment surveys showing households and businesses are less confident about the economic horizon and expect higher inflation.

In an interview on Bloomberg Television on Tuesday, Stephen Miran, who chairs the White House's Council of Economic Advisers, pushed back on the idea that the tariffs imposed by the administration so far and potentially added in coming weeks would result in meaningful inflation.

"We have been introducing tariffs since day one of this administration," Miran said, yet there has "been no real meaningful effect on inflation," with recent consumer price index reports coming in weaker than expected.

But Fed officials and analysts say they expect the impact has just not filtered through yet to the economy.

Walmart , the world's largest retailer and a major importer of goods from China, said last week that price increases were on the way, comments that drew a rebuff from President Donald Trump.

"We can control what we can control," Walmart CEO Doug McMillon said during the company's quarterly earnings call. Even trimming the tariffs on Chinese goods to 30%, as the administration recently did in backing off a more exorbitant 145% levy, "will result in higher prices," he said.

Inflation Expectations

The waiting game for Fed officials may prove a long one. The central bank has kept its policy rate in the current 4.25%-4.50% range since December, but says it will remain difficult to anticipate where the economy is heading until the tariff issue and other policies are settled for good - and enough time lapses after that to gauge the impact.

In comments to the Economic Club of Minnesota on Tuesday, St. Louis Fed President Alberto Musalem said the central bank needed to guard first and foremost against a rise in inflation expectations, and key to that effort will be assessing if coming price hikes seem like one-time increases or risk turning into something more persistent.

The tariff plans may have been scaled back, but still "seem likely to have a significant impact on the near-term economic outlook," Musalem said, with "direct one-off effects on the prices of imported final goods, indirect effects on the prices of domestically produced goods and services, and possibly second-round effects on inflation."

Deciding in advance that the effects will fade on their own, "runs the risk of underestimating the level and persistence," and creating more inflation trouble in the future, he said.

Source: Kitco

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Source: Bloomberg