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Post-Powell Market Snapshot

  • FI: GoC yields have been dragged higher today by Treasuries after a hawkish Powell indicated a more aggressive rate path ahead, pushing implied hikes even higher to 8.5 hikes in 2022 (including last week’s 25bp liftoff).
  • An earlier sell-off in the GoC long-end has meant surprisingly little flattening, with 2s10s almost unchanged on the day at a low 30bps, although this remains above lows of 25bps from the past two weeks.
  • FX: The same dynamic has seen USDCAD give back earlier losses but the dragging higher of Canadian implied yields sees CAD the top performer of the majors vs USD on the day.
  • USDCAD is -0.1% at 1.2594 having earlier cleared support of 1.2587, the low of the range seen since the war in Ukraine, opening 1.2552 (Fibo retracement of the Jan-Feb rally) and after which it could open a 1.24 handle.
  • Local drivers are light until BoC’s Deputy Governor Kozicki speaks at the SF Fed on Fri. US events and geopol headlines are likely to dominate.

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