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Hawkish Hold From BoC

CANADA

A hawkish hold from the BoC to maintain hiking flexibility come October. Excess demand in the economy may be easing but the impact of wildfires on GDP was noted, it is still concerned about the persistence of underlying inflationary pressures and it is explicitly prepared to hike again if needed.

  • GoCs yields have increased 3-4bps since the announcement but that slightly lags a larger sell-off in Tsys after a strong ISM services report.
  • The GoC sell-off builds on that seen in the hour beforehand to leave the 2Y +2.5bp on the day vs +3bps for Tsys.
  • USDCAD jumps higher but quickly off fresh recent highs of 1.3676 to 1.3654, about 20 pips since 1000ET. CAD switches to outperforming high beta peers.

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