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US CPI Still Setting Tone For CAD Rates, Not The BoC's Decision

CANADA
  • BoC-dated OIS showing very roughly 14bp of cumulative cuts for June from 17bp before the decision and 20bp before US CPI but it’s still volatile.
  • However, CAD FI is broadly keeping to relative levels seen after the US CPI-induced sell-off.
  • 2Y GoC yields have lifted 2.7bps since the BOC decision but it’s vs 3.2bps for Tsys - the Can-US differential is at -63bps for lowest levels since Mar 2023.
  • USDCAD starting to see a bit more of dip though, now at 1.3644 off 1.3678 just prior to the BoC decision having pushed above resistance at 1.3661 (Nov 27, 2023 high). Next resistance is seen at 1.3729 (Nov 22, 2023 high).
  • The presser opening statement welcomes the recent moderation in inflation but needs to see more: “we are seeing what we need to see, but we need to see it for longer”.
  • The 2024 CPI forecast was revised down from 2.8% to 2.6% - there was scope for a little lower with Bloomberg consensus at 2.5%.
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  • BoC-dated OIS showing very roughly 14bp of cumulative cuts for June from 17bp before the decision and 20bp before US CPI but it’s still volatile.
  • However, CAD FI is broadly keeping to relative levels seen after the US CPI-induced sell-off.
  • 2Y GoC yields have lifted 2.7bps since the BOC decision but it’s vs 3.2bps for Tsys - the Can-US differential is at -63bps for lowest levels since Mar 2023.
  • USDCAD starting to see a bit more of dip though, now at 1.3644 off 1.3678 just prior to the BoC decision having pushed above resistance at 1.3661 (Nov 27, 2023 high). Next resistance is seen at 1.3729 (Nov 22, 2023 high).
  • The presser opening statement welcomes the recent moderation in inflation but needs to see more: “we are seeing what we need to see, but we need to see it for longer”.
  • The 2024 CPI forecast was revised down from 2.8% to 2.6% - there was scope for a little lower with Bloomberg consensus at 2.5%.