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CAD Rate Path Mostly Higher Than Pre-CPI Levels

CANADA
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  • CAD implied rates have pushed higher today from a combination of some reflection on yesterday’s CPI data but also spillover from stronger US data.
  • The CORM4 implied yield remains below pre-CPI levels but beyond that yields are currently as much as 4bps higher - see table.
  • The June CPI report ruled out risk of another hawkish release and reversed much of the May surprise acceleration, prompting a further build in cut odds for next week's BoC decision although a reasonable acceleration in three-month trend rates helped limit dovish reaction beyond immediate meetings.
  • BoC-dated OIS shows ~22bp of cuts for the Jul 24 decision and most analysts we’ve seen have pulled forward their call for a second cut next week. JPM are an outlier though, bringing forward a rate cut but only to Sept from Q4 previously (before a 25bp per quarter pace until 3.25%), whilst GS also now expect a 25bp cut next week but “think the decision is a much closer call than current market-implied odds”.

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  • CAD implied rates have pushed higher today from a combination of some reflection on yesterday’s CPI data but also spillover from stronger US data.
  • The CORM4 implied yield remains below pre-CPI levels but beyond that yields are currently as much as 4bps higher - see table.
  • The June CPI report ruled out risk of another hawkish release and reversed much of the May surprise acceleration, prompting a further build in cut odds for next week's BoC decision although a reasonable acceleration in three-month trend rates helped limit dovish reaction beyond immediate meetings.
  • BoC-dated OIS shows ~22bp of cuts for the Jul 24 decision and most analysts we’ve seen have pulled forward their call for a second cut next week. JPM are an outlier though, bringing forward a rate cut but only to Sept from Q4 previously (before a 25bp per quarter pace until 3.25%), whilst GS also now expect a 25bp cut next week but “think the decision is a much closer call than current market-implied odds”.