BOC: Analysts Maintain Terminal BOC Rate Expectations Post-Meeting (1/2)
Jul-31 18:50
Analyst expectations for future Bank of Canada rate decisions were little changed after this week's rate hold and communications (MNI's review of the meeting is here). Most analysts see at least one further cut in the three remaining BOC meetings this year, with central expectations split between 2-3 reductions (MNI's terminal rate "median" remains 2.25% vs the current overnight policy rate of 2.75%). This compares with OIS pricing which sees just 15bp of cuts through the remainder of the year.
- Here are some highlights from sell-side analysts' BOC reviews, ordered from most to fewest expected cuts remaining in the cycle - views are unchanged from pre-BOC unless noted:
- BofA (3 more cuts this year): "Overall, we see the BoC communication as consistent with the possibility of a rate cut as soon as September. We expect that the key factor in the decision will be if core inflation moves closer to the 2.0% target before September. There are two inflation prints before September, thus with more data, the BoC would gain further clarity. After that, we see the BoC cutting its policy rate by 25bp at each of its meetings in October, and December to put the policy rate at 2.00% by year-end. We see risks for a hold in September if core inflation remains elevated. In that case the BoC could cut in October, December this year and January next year. The BoC could remain on hold if core inflation remains sticky or if the unemployment rate starts to fall."
- Desjardins (3 more cuts this year): "Reading between the lines, it does look like the Bank of Canada is teeing up a return to monetary easing later this year. Two out of the three scenarios presented today lean in favour of further cuts. Furthermore, the inflation forecasts in the current tariff scenario appear to be elevated, particularly considering recent figures on tariff revenues collected by the Canadian government, which have been lower than expected. That opens the door for inflation to print below expectations over the coming months, and help central bankers gain the confidence needed to deliver stimulus. As a result, we continue to see the Bank of Canada cutting rates three times this year, with the first 25 basis point cut coming at the next Bank of Canada fixed announcement date in September."
- CIBC (2 more cuts this year: "The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need support from further interest rate cuts in the future. However, it is clearly not there yet and upcoming data will remain more important than today's slight change in language in determining if that support comes as early as the September meeting as we currently forecast."
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COMMODITIES: Gold Recovers From Monday’s Low, WTI Rises
Jul-01 18:41
- Spot gold has rallied by 1.1% today to $3,338/oz, leaving the yellow metal 2.8% above yesterday's $3,248.7 low.
- Mounting fiscal concerns in the US as the Senate passed President Trump’s tax bill may be providing some support to gold, which has also benefitted from the further decline in the dollar so far this week.
- The recovery in gold highlights a possible false trendline break, after spot pushed through the 50-day EMA and trendline support drawn from the December 30 low last Friday.
- Spot has pierced initial resistance at $3,336.3, the 20-day EMA today, exposing the June 23 high at $3,395.1. Stronger gains would refocus attention on $3,451.3, the June 16 high.
- Meanwhile, crude is on track for slight gains on the day, with the market weighing stronger seasonal demand and improved global economic outlooks ahead of expected US trade deals, against expectations of another large OPEC+ output hike in August.
- WTI Aug 25 is up by 0.5% at $65.4/bbl.
- Oil traders expect OPEC+ will agree a fourth bumper oil supply increase on July 6, Bloomberg reports.
- For WTI futures, support to watch is at the 50-day EMA, at $64.64, which has been pierced. A clear break of it would signal scope for a deeper retracement, exposing $58.87, the May 30 low.
- On the upside, initial resistance to watch is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range.
US STOCKS: Late Equities Roundup: Still Mixed, Off Lows After Budget Bill Passes
Jul-01 18:33
- Stocks remain mixed in late Tuesday trade, the Dow continues to outperform weaker Nasdaq stocks while SPX eminis see-saw around steady. Currently, the DJIA trades up 426.94 points (+0.97%) at 44521.18, S&P E-Minis down 0.5 points (-0.12%) at 6253.25, Nasdaq down 127.80 points (-0.6%) at 20241.96.
- Trade negotiation headlines took a backseat to the Senate's US budget bill vote that needs a simple majority of 50 votes to pass, rather than the 60 required to pass under regular Senate order. In the case of a 50-50 vote, Vice President JD Vance would cast the tie-breaking vote.
- Stocks drifted higher after the Senate narrowly passed the budget bill which now goes to the House where GOP leaders want to see a final vote tomorrow, allowing Congress to send the completed bill to President Trump's desk on July 4.
- Materials, Health Care and Retail sectors led gainers in the second half with a fair amount of discretionary stocks as well: Builders FirstSource +9.44%, Las Vegas Sands +8.83%, Wynn Resorts +8.64%, Packaging Corp of America +7.44%, MGM Resorts International +7.21%, Smurfit WestRock PL +6.00%, Target Corp +5.62%, Hershey Co +5.49% and Best Buy Co +5.35%.
- Technology and energy related shares continued to underperform in late trade, the latter under pressure as an amendment to the budget bill struck down state-level bans on AI regulation: Palantir Technologies -4.60%, Broadcom -3.58%, Advanced Micro Devices -3.22%, Arista Networks -3.11% and Nvidia -2.11%. Perhaps ironically, energy stocks were under pressure for the same reasons as high speed chips use a lot of energy: Williams Cos -5.68%, GE Vernova -5.22%, Expand Energy -4.16% and Vistra -3.85%.
USDJPY TECHS: Bearish Theme
Jul-01 18:30
- RES 4: 149.28 High Apr 3
- RES 3: 148.65 High May 12 and a reversal trigger
- RES 2: 146.19/148.03 High Jun 24 / 23
- RES 1: 145.04 50-day EMA
- PRICE: 143.59 @ 16:22 BST Jul 1
- SUP 1: 142.68 Intraday low
- SUP 2: 142.12 Low May 27 and a key short-term support
- SUP 3: 141.96 76.4% retracement of the Apr 22 - May 12 upleg
- SUP 4: 141.49 Low Apr 23
A bear threat in USDJPY remains intact and Tuesday’s sell-off reinforces this theme. The Jun 23 shooting star candle formation highlighted a reversal of the recent recovery. Note too that price has traded through the 20- and 50-day EMAs. A clear break of the averages strengthens a bearish threat and opens 142.12, the May 27 low and a key short-term support. On the upside, a move above 148.03, the Jun 23 high, would reinstate a bullish theme.
