BOE: All seven non-dissenting MPC members to speak before end of September (1/2)
Sep-22 11:38
- All seven of the non-dissenting MPC members are due to make public appearances before the end of September. We will be in particular watching comments from the three MPC members who we think will be pivotal in determining whether we will see a Q4 cut (Bailey, Breeden and Ramsden).
- Governor Bailey will appear in a fireside chat today but the topic will be supervision in the financial sector – not the natural forum for comments on monetary policy. Bailey’s next public appearance is currently scheduled for Friday 3 October – but again that is on “Macro-financial stability in a fragmenting world”. It is a keynote speech at the Klass Knott farewell symposium so he may be more likely to speak on monetary policy here.
- Dave Ramsden will appear as a panellist on the policy panel at the ECB / Federal Reserve Bank of Cleveland “Inflation: Drivers and Dynamics 2025 Conference” on Monday 29 September. Alongside him on the panel will be ECB Chief Economist Lane and the Cleveland Fed’s Hammack (2026 voting member). We place Ramsden as the most dovish member on the MPC who did not vote for a cut last week – and will be looking for confirmation of this next week.
- Deputy Governor Breeden rarely speaks on monetary policy but her speech scheduled for Tuesday 30 September at Cardiff University is provisionally entitled “The Monetary Policy Outlook”. This will certainly be a key speech. She sounded slightly more dovish than Governor Bailey in our view following her testimony ahead of the TSC on 3 June but hasn’t really spoken on monetary policy since. Her tone is likely to be pivotal for markets, particularly if she strikes a dovish tone given current market pricing.
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FED: NatWest Now Sees Cuts In 2025, Starting In September
Aug-22 20:09
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
Aug-22 20:00
- 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
Aug-22 19:56
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".
