Henry Occleston
Summary The ECB cut 25bp as expected. The presser was more hawkish, especially around comments that they are ‘in a good place’ after the cut. This and the updated dovish forecasts suggests room for the economy to outperform, further quashing need for another cut. However, we are wary that their assumptions on tariffs look optimistic. […]
Viresh Kanabar
Summary Governor Macklem executed a dovish hold during yesterday’s BoC meeting. Three themes emerged during the presser: Uncertainty is weighing on Canada’s economy. Inflation remains too high. A cut and a pause were discussed, with inflation data leading to a pause. Market Implications We believe the BoC will next cut its policy rate in July. […]
Henry Occleston
Summary The ECB will likely cut rates by 25bp this week given trade tensions and the recent CPI miss. While the doves will hold the reins near term, pushbacks should begin to grow. Updated medium-term forecasts must contend with low productivity growth, labour market tightness and rising fiscal spending. We do not think the ECB […]
Viresh Kanabar
Summary May’s labour data showed further loosening with the unemployment rate rising to 6.9%. However, this data was overshadowed by hotter inflation and consumption data. While one-offs have mostly driven inflation higher, core inflation above 3.5% remains too hot to allow the BoC to cut further. Falling household savings suggest consumers are loosening their belts […]
Henry Occleston
Summary The BoE cut 25bp as expected. Pill’s backing for a pause was an unexpectedly hawkish surprise. So too was Bailey’s comment that the decision among centrists was a coinflip until the tariff announcement. We retain our central case that they skip cutting in June but will have the evidence needed to accelerate cuts from […]
Henry Occleston
Summary We expect the MPC to cut 25bp this week, with Dhingra and possibly Taylor backing a larger cut. Forecasts are likely to be more dovish on tariffs, low energy costs and undershooting wage growth. This and broader tariff uncertainty will add to a dovish tone in the statement – but we do not expect […]
Richard Jones
Summary US short-end yields have been wild this month, with prices rallying and sliding with every White House policy zigzag. The 2-yr US Treasury (UST) yield is now very near the middle of April’s MTD range (~3.65%/~3.95%). Technicals on US short-end futures contracts are neutral, very near the middle of the 30 (oversold)/70 (overbought) RSI […]
Henry Occleston
Summary We expect the ECB will cut 25bp this week, in line with consensus. For now, tariffs are dominating all else. In our view, the hawks are overly sanguine about inflation returning sustainably to target. However, hawkishness may not gain traction near-term given tariff fears and suppressed energy prices. The labour market continues to tighten […]
Viresh Kanabar
Summary We think the BoC will remain on hold tomorrow. Since the last meeting, reciprocal tariffs have impacted Canada less, while core inflation has crept above 3% YoY. Given recent CAD appreciation, further labour market weakness and the potentially smaller hit to inflation, there may be more focus on Canada’s growth outlook in the months […]
Richard Jones
Summary USD/CAD is down for the sixth successive week, and for the eighth week in ten. The pair printed a new YTD low this week, where it currently trades. USD/CAD is approaching its 200-day moving average (DMA), very near 1.4000. Market Implications We think the 200-DMA should robustly support USD/CAD and with an RSI approaching […]
Richard Jones
Summary EUR/USD is up ~6% so far year-to-date (YTD). The pair hovers about one percentage point off its YTD high seen yesterday, having gained about 1.5% this week ahead of the US jobs report and Powell’s speech later today. Technicals show EUR/USD as overbought in the near-term, coinciding with CTAs ramping up EUR/USD long positioning. […]
Richard Jones
Summary On 14 February, the US Treasury (UST) 2-year, 10-year, and the 30-year yields were at ~4.30%, ~4.5% and 4.70%, respectively. Back then, we thought UST yields would trade within the YTD ranges established at that time. UST yields then plummeted to new YTD lows and have now bounced. Market Implications We think that there […]
Richard Jones
Summary The USD index (DXY) is rising this week, for only the second week in seven. DXY technicals were oversold, but the Relative Strength Index (RSI) has partly unwound. Room exists for RSIs to unwind slightly higher in the coming days. Long and short USD exposures are not crowded. This clean positioning means chances of […]
Richard Jones
Summary The USD Index (DXY) traded 3.5% lower last week – its worst week since November 2022. DXY is trading slightly higher this week, with the index down for six of the past nine weeks. A key DXY technical indicator, the RSI, is turning from being oversold. Market Implications With the technicals turning, we think […]
Richard Jones
Summary President Donald Trump imposed 25% tariffs on all Canadian goods this week, although a one-month exemption has been granted for the auto industry. USD/CAD rose on the news but is now lower on the week. This is partly because of the prospect of the auto exemption, but also on broader USD weakness. The US-Canada […]
Richard Jones
Summary USD/CAD has been on a roller coaster ride so far this month, peaking just below 1.4800 on 3 February, and troughing at 1.4150 on 14 February (both intraday). The pair now trades at ~1.4440, near the middle of its year-to-date (YTD) range. After a one-month deferral on 4 February, President Donald Trump says 25% […]
Richard Jones
Summary UK gilt yields have risen across the curve in the past two weeks. Bank of England (BoE) Governor Andrew Bailey downplayed any inflation rise, instead focusing on the UK’s weak growth environment and accelerating disinflation. Momentum players have increased UK gilts bearishness. Market Implications We think the rise in gilt yields presents an opportunity […]
Ben Ford
Summary The RBA cautiously lowered the cash rate by 25bps to 4.1% at its February meeting. Three factors drove the easing bias, one held it back. 1) Moderating underlying inflation saw price pressures below RBA forecast. Forward-looking data suggests continued easing, too. 2) Subdued private demand growth has worried the RBA. They have baked in […]
Richard Jones
Summary Roughly seven weeks into 2025, and the US treasury (UST) market has already established decent, tradable year-to-date (YTD) ranges. For 2-year, 10-year and 30-year UST yields, trade has been choppy but should now churn around within the YTD ranges into March. With tariffs set to start next month (or, for Canada and Mexico, additional […]
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