After signing up, you will receive regular newsletters from Corpay, and may unsubscribe at any time. View Corpay’s Privacy Policy
Labour market slack is shrinking. Fed expectations have fallen sharply. Bank of Canada projections have dropped more significantly. But economic surprise gaps are still very wide. Underlying growth signals are surprisingly stable. And rate differentials remain dollar-supportive. US economic policy uncertainty has fallen to record lows… huh?
With incoming economic data softening across North America, market projections for central bank policy paths have shifted significantly in the last few weeks. In contrast with implied market pricing on October 18 – when the Federal Reserve was seen delivering at least one, maybe two cuts by November 2024, even as the Bank of Canada was expected to keep rates on hold – the US is now seen slashing rates at least three times, while Canada is expected to cut at least twice. To us, this has reduced mispricing embedded in dollar-Canada rate differentials, and has temporarily reduced downside risks...
The US labour market slowed sharply in October, suggesting that the Federal Reserve is likely to remain on hold through the early part of next year. According to data released by the Bureau of Labor Statistics this morning, just 150,000 jobs were added, down from a revised 297,000 in September, and the unemployment rate crept higher to 3.9 percent. Average hourly earnings rose 0.2 percent month-over-month, modestly below expectations. Ahead of the release, “whisper number” estimates had forecast a 200,000-job gain and the unemployment rate was seen holding at 3.8 percent. The dollar is weakening, equity futures are pushing higher,...
Happy non-farm payrolls day, to all who celebrate. Ahead of the most important release on the monthly economic calendar, markets are working to demolish the Federal Reserve’s “higher for longer” narrative. Investors, apparently comforted by Jerome Powell’s words during Wednesday’s post-meeting press conference, have dramatically lowered odds on another interest rate hike in the coming months, and have moved to add two rate cuts to 2024 – in addition to the two already priced in. After breaking above 5 percent for the first time since 2007 last week, ten-year Treasury yields have lost almost 35 basis points, marking one of...
Yesterday’s Federal Reserve decision was seen as tilting dovish, with a newfound emphasis on “tighter financial conditions” taken to mean that higher bond yields are negating the need for further rate hikes. Ten-year government bond yields fell below 4.75 percent for the first time since mid-October, extending a move that began earlier in the session when the Treasury Department said it would ramp up issuance more slowly, and accelerated after the Institute for Supply Management’s manufacturing index tumbled more than expected. Equities gained, and the dollar fell against all of its major counterparts. This was to be expected: several officials,...