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Scotia: Stronger Case For BoC To Wait Until July To Cut

CANADA
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  • After four soft readings in a row, “The key question is whether that’s enough to prompt the BoC to cut as soon as two weeks from now on June 5th or whether patience while seeking more data and other arguments to holding off will dominate.”
  • “Our best odds remain on a Q3 cut with July the most probable and 75bps of cuts this year. July pricing is worth paying on the belief that it’s unlikely that the BoC would cut back-to-back in both June and July and yet July OIS has about 30bps priced.”
  • “Why wait? For one, Governor Macklem said in carefully developed written testimony just on May 2nd that they would be evaluating developments over coming “months” of additional evidence.”
  • “If Macklem cuts on June 5th after saying he wished to wait “months” then the rates complex would probably pile into more cuts for the year as a whole.”
  • Scotia also point to an array of extra information available to the BoC by waiting until Jul 24, including: the quarterly business and consumer surveys, fresh forecasts with the MPR, seeing what the Fed does including its SEP on Jun 12 plus two more monthly jobs reports.
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  • After four soft readings in a row, “The key question is whether that’s enough to prompt the BoC to cut as soon as two weeks from now on June 5th or whether patience while seeking more data and other arguments to holding off will dominate.”
  • “Our best odds remain on a Q3 cut with July the most probable and 75bps of cuts this year. July pricing is worth paying on the belief that it’s unlikely that the BoC would cut back-to-back in both June and July and yet July OIS has about 30bps priced.”
  • “Why wait? For one, Governor Macklem said in carefully developed written testimony just on May 2nd that they would be evaluating developments over coming “months” of additional evidence.”
  • “If Macklem cuts on June 5th after saying he wished to wait “months” then the rates complex would probably pile into more cuts for the year as a whole.”
  • Scotia also point to an array of extra information available to the BoC by waiting until Jul 24, including: the quarterly business and consumer surveys, fresh forecasts with the MPR, seeing what the Fed does including its SEP on Jun 12 plus two more monthly jobs reports.