MEXICO: Analysts Expect Banxico To Pause Easing Cycle Until May
Jan-07 12:24
- USDMXN price action remains muted ahead of the NY crossover, after the pair has found some support just above recent cycle lows of 17.8689. However, bearish conditions continue to prevail overall, and recent weakness strengthens the likelihood of a move towards 17.6067, a key technical parameter from the aftermath of the 2024 election.
- On the data front, formal job creation and ANTAD same-store sales figures, both for December, are due in the coming days, potentially today. Focus, however, remains on tomorrow’s December CPI data, where headline inflation is seen edging marginally lower to 3.76% y/y, while core inflation may tick down to 4.34% y/y. Despite the improvement, this would keep core inflation above the central bank’s 4% target range ceiling, which may prompt some caution in the pace of the easing cycle ahead.
- To recap, the Banxico Board tweaked its forward guidance last month to hint at a pause in the rate cutting cycle ahead. Tomorrow’s Banxico minutes should provide more colour for this shift in the guidance, and whether Board members see it as warranted to pause the easing cycle early this year.
- According to yesterday’s Citi economist survey, analysts now see the central bank on hold until May, when the next 25bp rate cut will be delivered. The policy rate is still seen ending this year at 6.50%, however. This expected pause comes as analysts now forecast inflation to end this year at 4.00% (vs. 3.90% previously), while the 2026 GDP growth estimate was raised 10bp to 1.3%.
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OUTLOOK: Price Signal Summary - Monitoring Support In Gilts
Dec-08 12:18
- In the FI space, Bund futures remain in a bear-mode cycle following last week’s impulsive sell-off, and today’s bearish start to the week. The breach of 128.67, the Nov 20 low, confirms a resumption of the bear cycle that started on Oct 17. The contract has traded through the 128.00 handle, paving the way for an extension towards 127.57 next, a 2.000 projection of the Nov 12 - 20 - 26 price swing, ahead of the 127.00 handle. Key short-term resistance is 129.55, Nov 26 high. A corrective bounce would allow an oversold trend condition to unwind.
- A bullish short-term cycle in Gilt futures remains intact and the latest pullback appears corrective - for now. A resumption of gains would signal scope for a climb towards resistance at 92.55, the Nov 11 high. A gap in the daily chart has been filled and initial resistance to watch is 91.93, the Nov 27 high. Support to watch lies at 90.53, the Nov 26 low.
FOREX: CADCHF at 3-Month Highs Ahead of BOC/SNB [2/2]
Dec-08 12:05
- EURCAD slipped to a 3-month low on Friday, having held a contained range across November. Despite the 1% move lower, the cross remains 8% higher on the year and a pullback towards prior lows at 1.6000 and 1.5770 should not be ruled out. Russia/Ukraine ceasefire odds in 2026 remain at around 47% despite the consistent headlines surrounding peace talks, perhaps constraining the Euro’s upside, while EZ growth data continues to remain moderate at best.
- With the SNB decision also this week, CADCHF has risen back above 0.5800, a significant chart level across July/August this year. Persisting risk optimism highlighted by the resilience for major equity indices provides a tailwind for the cross, while the recent failure for EURCHF below 0.9200 may continue to frustrate remaining Franc longs. August highs at 0.5899 remain an obvious short-term target for CADCHF.
- RBC say the November labour report cements the decision to hold rates this week and is “consistent with our base case that the BoC will not need to reduce interest rates again through next year”. Separately Goldman Sachs note that several arguments they have made in favour of CAD funding still hold. However, recent data has signalled improvement, and GS see risks to CAD funding should growth data ultimately confirm that the economy has made it through the trough and is on an upward trend.
FOREX: USDCAD Consolidates Plunge Lower, Data Remains in CAD’s Favour [1/2]
Dec-08 12:02
- The Canadian dollar rallied impressively on Friday following the stellar employment report for November. As a reminder, job gains rose a solid 53.6k versus a -2.5k est., while the unemployment rate also dipped to the 6.5%, the lowest level since July 2024.
- The data builds on two similarly impressive prior jobs report, combining with a Q3 GDP print that showed that Canada's economy rebounded much faster than expected, underpinning the likely BOC hold this week.
- Technical developments have really boosted the bearish outlook for USDCAD. Resistance at the top of the bull channel held very well in early November, drawn from the July 23 low, and subsequently, the breach of the bull channel base has exacerbated downside momentum. A further break of the October low at 1.3888 also bolsters the bearish narrative.
- Price action this morning has seen USDCAD consolidate the recent plunge, printing a new 1.3814 low. 1.3769 (retracement point) and 1.3727 (Sep17 low) are the next chart points in focus as we approach both the BOC and FOMC decisions this week.
- Trade talks with the US remain stalled, however, there may be reason for tepid optimism given that Trump said Friday he is getting along well with Canada. Furthermore, when pressed on whether talks could be restarted, Trump said, "we'll work it out", before adding "They're very tough traders but I have a very good relationship with the Prime Minister and with Canada".
