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CANADA: Another CPI Miss Sees 50bp BoC Cut Increasingly Likely

CANADA
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  • A softer Canadian CPI report sees BoC-dated OIS shift to ~44bp of cuts priced for next week’s BoC decision from 38bp prior.
  • 2Y GoC yields are 5.5bps lower post-release.
  • It sees the Can-US 2Y differential 4.5bp lower at -95bps, through the -90bps levels seen when the BoC first started its easing cycle in June.
  • USDCAD has extended its gains, touching a high of 1.3836. It has pushed through resistance at 1.3822 (76.4% retrace of Aug 5 – Sep 25 bear leg) to open 1.3856 (Aug 6 high.
  • Rallies are likely limited by the BoC’s preferred core measures seeing a smaller miss (average of the median and trim measures unchanged at 2.35% Y/Y vs the 2.4% expected) than that for headline CPI (1.6% vs cons 1.8 after 2.0).
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  • A softer Canadian CPI report sees BoC-dated OIS shift to ~44bp of cuts priced for next week’s BoC decision from 38bp prior.
  • 2Y GoC yields are 5.5bps lower post-release.
  • It sees the Can-US 2Y differential 4.5bp lower at -95bps, through the -90bps levels seen when the BoC first started its easing cycle in June.
  • USDCAD has extended its gains, touching a high of 1.3836. It has pushed through resistance at 1.3822 (76.4% retrace of Aug 5 – Sep 25 bear leg) to open 1.3856 (Aug 6 high.
  • Rallies are likely limited by the BoC’s preferred core measures seeing a smaller miss (average of the median and trim measures unchanged at 2.35% Y/Y vs the 2.4% expected) than that for headline CPI (1.6% vs cons 1.8 after 2.0).