BOC: Ahead Of Macklem Speech, Next Cut Not Fully Priced Until January
Reminder that BOC Governor Macklem speaks soon on "Global trade and capital flows" before the Saskatchewan Trade and Export Partnership and the Greater Saskatoon Chamber of Commerce - timing of approximately 1430ET. Macklem will take reporters' questions at around 1545ET.
- Livestream link here
- Implied BOC meeting cut pricing is little changed this week so far, with October's pointing to around 55-60% implied probability of a follow-up 25bp rate cut (~14bp, depending on your CORRA assumptions), and a 25bp cut fully priced cumulatively by January. There's still only one full cut still seen for the cycle, though.
- Indeed, pricing hasn't changed much since last week's post-meeting press conference, in which Macklem entertained questions about what would trigger a further cut. The overall communications highlighted risks to growth and employment alongside what the BOC sees as better-contained inflationary pressures than had been feared in the summer. MNI's review of the meeting is here
- He continually mentioned the need for a balanced approach to future rate-setting, moving meeting-by- meeting and keeping the next decision in October live. This was summed up by his comment: “what we can do is help the economy adjust while maintaining wellcontrolled inflation. That's what we're focused on... it's going to be about balancing those risks. If the risks tilt, if the risks shift, we're prepared to take action, and if the risks tilt further, we're prepared to take more action, but we're going to take it one meeting at a time. We are taking a shorter horizon. We're being a little less forward looking than usual, and we'll make that risk assessment in October when we get there."
| Meeting | Current | Last Week's Close (Sep 19) | Change since then | Cumulative Change From Current Rate (bp) |
| Oct 29 2025 | 2.40 | 2.41 | -0.8 | -14.3 |
| Dec 10 2025 | 2.32 | 2.32 | -0.1 | -22.3 |
| Jan 28 2026 | 2.28 | 2.27 | 0.5 | -26.9 |
| Mar 18 2026 | 2.23 | 2.25 | -1.3 | -31.1 |
| Apr 29 2026 | 2.20 | 2.22 | -1.7 | -34.2 |
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FED: NatWest Now Sees Cuts In 2025, Starting In September
As with Deutsche earlier, NatWest has changed its Fed call after the Powell Jackson Hole speech to reflect a 25bp September cut. Previously, the call was for no cuts in 2025. The new baseline outlook includes further 25bp cuts in December and March, bringing rates closer to neutral ("however, the changing composition of the committee becomes far less clear once Powell term expires in May").
- "While the August jobs and CPI reports will be watched carefully, it is clear to us that Powell has already seen enough to decide renewed action to counter downside economic risks is likely warranted, and so we now look for a 25 basis point rate cut on September 17th.
- "We expect officials will very much downplay the likelihood of a 50bp rate cut leading up to the jobs data, but we have to admit if the report is "weak enough" (e.g., the unemployment rate increases by 0.3pct to 4.5% (where officials had it at year end) anything can happen and wouldn't rule anything out. However, given the latest pivot and with financial markets pricing (86% of a 25bp rate cut) a lot has to happen (unemployment rate 3-handle and core CPI +0.5%) for the FOMC to undeliver and hold off from a rate cut in September. "
USDCAD TECHS: Bull Cycle Hindered
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3968 High May 20
- RES 1: 1.3925 High Aug 22
- PRICE: 1.3840 @ 16:55 BST Aug 22
- SUP 1: 1.3794 20-day EMA
- SUP 2: 1.3769/22 50-day EMA / Low Aug 22
- SUP 3: 1.3576 Low Jul 23
- SUP 4: 1.3557/40 Low Jul 3 / Low Jun 16 and the bear trigger
Gains this week in USDCAD and the breach of resistance at 1.3879, the Aug 1 high, marked a positive development, however the slippage into the Friday close undermines this sentiment - for now. Moving average studies have crossed and are in a bull-mode position, reinforcing current conditions. An extension higher would signal scope for a climb towards 1.4019, a Fibonacci retracement. On the downside, support to watch lies at 1.3769, the 50-day EMA - a level not yet challenged by the correction lower.
CANADA: Q2 Expected To See GDP Contraction, BOC's Estimate Looks Too Negative
The June retail sales release helps wrap up the last major data before Canadian Q2 GDP is released on Friday August 29.
- Current Bloomberg analyst consensus shows Q2 is expected to show a 0.7% Q/Q annualized contraction, versus +2.2% in Q1. The private sector consensus is more optimistic than the Bank of Canada's -1.5% estimate in its July Monetary Policy Report (which MNI thinks is too low) but the component-by-component breakdown is similar if of differing magnitudes.
- Widely expected are: a softening in household consumption growth (+1.2% in Q1), with a pickup in government spending, continued weakness in fixed investment (-3.0% in Q1) though with residential outperforming business capital formation, and a reversal of Q2's positive contribution from net exports. In short, the data are expected to confirm that trade activity was brought forward to Q1 ahead of tariffs, with the effects reversing in Q2.
- Going forward, the BOC envisages growth resuming in Q3 (+1.0% in its "current tariff" scenario). In the meantime, a weak Q2 reading could provide Governing Council with more conviction to resume easing rates in September, with the July meeting decision noting "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate".
