CANADA: Analysts Eye Underlying Domestic Demand Through GDP Noise (2/3)
Feb-25 20:41
Canadian bank analyst views on the upcoming GDP release, in descending order of Q4 Q/Q SAAR GDP forecast:
- National (0.2% Dec, 0.2% Q4): "growth in final domestic demand may have slowed during the quarter, with a rebound in investment in machinery and equipment having likely been offset in part by lower spending in the residential and non-residential structures segments. Personal consumption expenditure may have stagnated, judging by the already published retail sales data. Unlike in the last two quarters, international trade is expected to have had only a minor impact on headline growth, albeit a positive one. Finally, government spending is expected to have contributed positively to growth for the third consecutive quarter."
- RBC (0.2% Dec, 0.0% Q4): "International trade uncertainty and volatility has been a persistent feature in the growth backdrop over the last year, but we expect a flat Q4 gross domestic product reading ... was in part due to temporary disruptions in the economy with signs of stronger activity late in the quarter. The silver lining to a soft looking quarter is that most of the weakness was concentrated in October and November with industry reports for December mostly positive."
- Desjardins (0.1% Dec, 0.0% Q4): "Household consumption remains solid, with positive contributions from key components such as durable goods purchases and consumer services. We anticipate modest growth in government expenditures. We expect net exports to be a drag as imports continued to rise due to the removal of some retaliatory tariffs. Lastly, we expect residential investment to have risen in the fourth quarter, but business investment likely tracked lower amid persistent uncertainty."
- CIBC (0.1% Dec, -0.2% Q4): "Canadian GDP may have taken a small step backwards in the fourth quarter, and net trade isn’t expected to be the culprit....Instead, weakness will likely show up in the form of further weakness in consumer goods spending, a slip back in residential investment and slower inventory accumulation. While final domestic demand may have risen, growth is expected to be only modest...policymakers are still attributing much of the weakness in GDP to structural factors, and because of that next month’s labour market data will likely be more important in determining if further rate cuts may be in the cards."
- TD: (0.2% Dec, -0.4% Q4): "a drag from softer goods consumption and residential investment offsetting a positive contribution from exports."
- Scotiabank (0.1% Dec, -0.5% Q4): "It’s possible that we will see Q3 GDP revisions. Recall that Statcan initially guesstimated trade figures for that quarter because their US compatriots were in a protracted government shutdown. Since then, we’ve learned that export volumes were higher using monthly figures including revisions compared to the initial export figures in the GDP accounts for Q3. Net trade contributions could be revised up in Q3 GDP, but we don’t know if that came at the expense of inventories or through higher production."
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US TSYS: Two-Way Positioning Ahead Expected Neutral Hold from FOMC Wednesday
Jan-26 20:35
- Treasuries look to finish moderately higher Monday - inside session range on two-way positioning ahead of Wednesday afternoon's FOMC policy annc.
- The Fed appears poised to deliver a neutral hold, with heated debate continuing about the appropriate pace of easing over the coming year. Note, betting markets show swing in Fed chair nominee with current BlackRock fixed income CIO Rick Rieder's implied odds rising to appr 50% as Kevin Warsh declines to 30%.
- Projected rate cut pricing largely steady vs. late Friday levels (*): Jan'26 at -0.7bp, Mar'26 at -4.2bp, Apr'26 at -7.7bp (-8.2bp), Jun'26 at -19.2bp (-18.7bp), first full cut priced in at Jul'26: -26.7bp (-25.2bp).
- Currently, TYH6 trades +5.5 at 111-27 (111-22.5 low / 111-30 high) on 1.3M volume. Initial firm resistance is at the 20-day EMA, currently at 112-03. The 50-day EMA is at 112-11+. The area between the 20- and 50-day averages represents a key resistance zone. For bears, a resumption of the bear leg would refocus attention on the bear trigger at 111-09, the Jan 10 low.
- Headline durable goods orders rose 5.3% M/M (4.0% expected, prior -2.1%) but this is a notoriously volatile series and it was core capital goods orders that truly impressed. They rose 0.7% M/M (0.3% expected) albeit with a 0.2pp downward revision to October's growth (to 0.3%).
- Look ahead to Tuesday: ADP Weekly NER Pulse kicks data off at 0815ET, FHFA House Price data at 0900, Richmond Fed Mfg index along with Conf. Board Consumer Confidence at 1000ET, Dallas Fed Services Activity at 1030Et. Treasury auctions $70B 5Y notes at 1300ET (91282CPW5).
AUDUSD TECHS: Trend Needle Points North
Jan-26 20:30
- RES 4: 0.7060 1.764 proj of the Nov 21 - Dec 10 - 18 price swing
- RES 3: 0.7022 1.618 proj of the Nov 21 - Dec 10 - 18 price swing
- RES 2: 0.6991 1.500 proj of the Nov 21 - Dec 10 - 18 price swing
- RES 1: 0.6942 High Sep 30 2024 and a key resistance
- PRICE: 0.6934 @ 16:10 GMT Jan 26
- SUP 1: 0.6834 Low Jan 23
- SUP 2: 0.6728 20-day EMA
- SUP 3: 0.6667 50-day EMA
- SUP 4: 0.6593 Low Dec 18
AUDUSD gains last week strengthen a bullish theme and highlight an acceleration of the uptrend. Moving average studies are in a bull-mode position too, reinforcing current trend conditions. Sights are on 0.6942 next, the Sep 30 2024 high and a key resistance. The trend is overbought and any pullback would allow this condition to unwind. Firm support to watch lies at 0.6728, the 20-day EMA.
US TSYS: Late SOFR/Treasury Option Roundup: Mixed Two-Way Ahead Wed's FOMC
Jan-26 20:20
Treasury options saw modest put flow on net, SOFR options mixed, two-way, also on lighter volumes ahead of Wednesday's FOMC policy annc. Underlying futures firmer, off late overnight highs, curves bull flatten (2s10s -.973 at 61.937). Projected rate cut pricing largely steady vs. late Friday levels (*): Jan'26 at -0.7bp, Mar'26 at -4.2bp, Apr'26 at -7.7bp (-8.2bp), Jun'26 at -19.2bp (-18.7bp), first full cut priced in at Jul'26: -26.7bp (-25.2bp).
- SOFR Options:
- +10,000 0QZ6 97.00 calls, 14 vs. 96.645/0.10%
- +19,000 SFRJ6 97.25 calls, 1.0
- +45,000 SFRZ6 97.50/98.50 call spds, 3.5 ref 96.74
- +4,000 SFRG6 96.43/96.50/96.56 call flys, .25
- +2,000 SFRU6 96.18/96.31/96.43 put trees, 2.75
- +3,000 SFRM6 96.37 puts, 1.75
- -3,200 SFRJ6 96.56 calls, 6.25
- +4,000 0QU6 97.25/97.75/98.25 call flys, 3.0 vs 96.675/0.08%
- +3,000 SFRZ6 96.00/96.25/96.50 put flys, 4.75
- Treasury Options:
- 6,000 TYH6 113 calls, 6 ref 111-28
- -15,000 FVH6 108/108.5 put spds, 7.5 vs. 108-24/0.22%
- over 5,100 TYH6 112 calls, 24 last
- +1,500 TYH6 110.75/111.25 put spds, 7 vs. 111-27/0.10%
- +2,000 wk5 TY 111.25 puts, 3 vs. 111-29/0.08%
- +2,500 USK6 112 puts, 59
- 1,600 TYH6 110.75/111.25 put spds ref 111-28
- -3,000 TYH6 109/112 put spds, 33 vs. 111-27.5/0.51%
- +4,000 TYK6 112.5 calls, 14 vs. 111-26.5/0.27%
