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CAD

22 Jun 2023

Markets weaken as Bank of England delivers another hawkish surprise

The British pound is consolidating gains after the Bank of England joined its Commonwealth counterparts in wrongfooting markets with a bigger-than-expected half-point hike at this morning’s meeting. Responding to “material news” of an acceleration in wages and consumer prices, the Monetary Policy Committee voted seven to two in favour of raising rates to the highest levels since 2008, with Governor Bailey saying “Bringing inflation down is our absolute priority”. From today’s 5 percent, traders now expect the Bank Rate to peak above 6 percent in early 2024. This should, in theory, generate a lot of carry support for the pound – speculators...

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21 Jun 2023

Markets retreat ahead of Powell testimony

In a return to the “good news is bad news” dynamic that drove price action through the post-global financial crisis years, markets are back in risk-off mode this morning. Data out yesterday showed US housing starts jumped in May by the most since 2016, providing more evidence of underlying resilience in the world’s largest economy – while also making additional rate hikes more likely. The dollar is higher, yields are flat, and commodity-linked currencies are down across the board. Jerome Powell is expected to deliver a hawkish message when he appears in front of the House Financial Services Committee this morning. Last week’s “dot...

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20 Jun 2023

Risk assets pause for breath as Fed pushback becomes more likely

Markets are turning more cautious after last week’s “melt-up” in risk assets, with the dollar climbing against its rivals, Treasury yields ticking higher, and equity markets beating a slow retreat. The British pound is holding near to a ten-month high against the euro and a 14-month peak against the dollar, supported by rising rate expectations. Following strong labour market and wage growth data, the latest inflation print, out tomorrow morning, is expected to show headline price growth easing only slightly in the the month of May, and the core measure is seen holding close to 6.8 percent in year-over-year terms. In response,...

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15 Jun 2023

Another hawkish ECB hike

• Weaker USD. ECB delivered another hawkish hike. Policy divergence between the ECB & US Fed has boosted the EUR & weighed on the USD.• AUD stronger. Compounding the softer USD was another strong local labour market report & expectations China could announce stimulus to boost growth.• BoJ today. No changes expected. But tweaks appear inevitable. JPY is at quite low levels. We think there are more upside than downside risks from here. US and European markets diverged overnight, with contrasting central bank expectations a driver. European equities eased back (EuroStoxx50 -0.3%) and bond yields rose after the ECB delivered...

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14 Jun 2023

Risk appetites improve as Fed meeting looms

Risk-sensitive currencies are on the march and the dollar is retreating after US inflation cooled in May, reducing the impetus for tighter monetary policy. The Bureau of Labor Statistics yesterday said headline prices climbed 4 percent in the year through May, down sharply from 4.9 percent in April and well below the 9.1-percent peak reached last June. The so-called “supercore” measure – which excludes highly-volatile food, energy, goods, and housing prices – climbed just 0.24 percent month over month, broadly in line with long-term pre-pandemic averages. Markets are firmly positioned for a “hawkish hold” in this afternoon’s Federal Reserve meeting....

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