BOC: MNI BoC Review-April 2025: "The Situation Is No Clearer"
Apr-16 23:41
We've just published our review of the April Bank of Canada decision - Download Full Report Here
- The Bank of Canada held rates in April for the first time in 8 meetings, leaving the overnight rate at 2.75%. The decision was a partial surprise, with markets having priced in a 30-40% probability of a 25bp cut (and a similarly proportioned split among analysts), but was in line with the MNI Markets Team’s expectations.
- The BOC hold may not have been fully priced, but the decision made almost no difference to market perceptions of the path of rates for the rest of the year - befitting the BOC's communications which revealed little new in terms of its preferences for easing at an upcoming meeting amid major tariff-related uncertainty.
- The decision statement pointed to a weaker backdrop for economic activity, with uncertainty over trade starting to spill over into the labour market, and re-emphasized the need to contain any lingering inflationary pressures from tariffs, concluding that “Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.”
- Forward guidance remains elusive, and as Governor Macklem put it in his opening statement to the press conference, the BOC doesn’t “know what's coming next, and US policy could well move back and forth before the situation is clearer."
- In this vein, the latest Monetary Policy Report unusually didn’t have a central forecast, instead laying out two scenarios for the Canadian economy in the context of a US/global trade conflict - one more benign and the other more severe.
- Either way, the expected path ahead looks more inflationary with slower growth than had previously been forecast – making for a more complicated (and hesitant) policy reaction.
- Another two to three 25bp cuts remain broadly expected at some point by end-2025, and we didn’t see any changes to analysts’ expected terminal rates which hover around 2.00 / 2.25% with a range of 1.50-2.75%.
- There is a better than 50% implied probability of a June cut. For now, the BOC will wait for greater clarity before deciding to make its next move, and it’s unclear when such clarity will arrive.
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JGBS: Futures Higher Overnight, Focus On Tomorrow’s BoJ Policy Decision
Mar-17 23:30
In post-Tokyo trade, JGB futures closed stronger, +8 compared to settlement levels, after US tsys finished the NY session showing a twist-flattening, with yields 3bps higher to 3bps lower, pivoting at the 7-year.
- US tsy yields rose to their daily highs after Retail Sales data was released, with the market focusing more on the stronger control group sales, but the move wasn’t sustained and yields subsequently tracked lower.
- Headline advance retail sales were much weaker than expected in February at 0.2% M/M (0.6% expected, -1.2% prior rev from -0.9%), but this was offset by strong performances in core categories. But the control group sales rose 1.0% vs the 0.4% expected, more than offsetting the downward revision to Jan (-1.0% vs -0.8% prelim).
- Headline manufacturing index slipped -20 (cons -2) in March from +5.7. It’s the lowest since Jan 2024 having been at its strongest reading since a particularly strong 20.2 in Nov and before that Apr 2023.
- Today, the local calendar will see the Tertiary Industry Index and Tokyo Condominiums for Sale data alongside 1-year note supply. Nevertheless, the focus remains on tomorrow’s BoJ Policy Decision. It is widely expected that the policy rate will remain at 0.50%.
AUSSIE 10-YEAR TECHS: (H5) Reverses Off First Resistance
Mar-17 23:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.740/851 - High Mar 4 / High Dec 11
- PRICE: 95.580 @ 16:42 GMT Mar 17
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures have faded sharply off the mid-week high, opening a small gap with first resistance. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
CNH: USD/CNH Still Above 200-day MA Support, CNH Lags Higher Beta FX
Mar-17 23:08
USD/CNH tracks near 7.2290 in early Tuesday dealings, close to Monday intra-session lows near 7.2250. CNH gained 0.15% for Monday's session, slightly lagging broader USD index losses (the DXY lost 0.34%, the BBDXY down 0.26%). USD/CNH spot finished up at 7.2262. The CNY CFETS basket tracker, per BBG, was unchanged at 98.82.
- For USD/CNH technicals, we are close to the 200-day MA (near 7.2215). A clean break south is likely to see round figure support at 7.2000 targeted. In terms of topside resistance, we have the 200-day EMA at 7.2390, while all the other key EMAs are above 7.2500.
- CNH/JPY has rebounded back above 20.60, with recent lows just under 20.20. EUR/CNH remains elevated though, last above 7.89 and close to recent highs (7.9151). AUD/CNH is above 4.6150, testing 100-day EMA resistance. CNH has generally lagged the softer USD tone and better risk appetite of late.
- In the equity space, to recap onshore markets finished down slightly in terms for the CSI 300, but the Shanghai Composite edged higher. In US trade, the Golden Dragon index was up 4% though.
- Markets are digesting recent announcements around the PBoC mulling new tools to target key consumption sectors. Chinese authorities are also set to release plans for childcare subsidies, as well as increasing incomes of low-income rural populations, in a bid to boost consumption (see this link).
- US President Trump also stated China President Xi Jinping would visit the US soon (in remarks made Monday US time, see this BBG link).
